Webinar Insights: “Rooftop solar adoption trends in MSME segment in India”
Regarded as the backbone of the Indian economy, the Micro, Small & Medium Enterprises (MSMEs) also holds immense potential to support the Rooftop Solar market. For most MSMEs, there is significant scope in electricity cost savings and ideally, Rooftop Solar is the simplest path to achieve the reduction in electricity bill. However, as the opportunities being presented by the sector are numerous, it is also confronted by many challenges.
To take cognizance of the current ‘forces’ acting upon this particular segment, JMK Research & Analytics conducted a webinar on “Rooftop solar adoption trends in MSME segment in India”. The eminent panellists for this session were:
- Mr. Sandesh Narayana Murthy, Regional Manager- South, Solis
- Mr. Ravinder Singh, Chief Solar Rooftop Business, Tata Power
- Mr. NP Ramesh, COO, and Co-Founder, ORB Energy
- Mr. Shobhit Rai, Director, Prozeal Infra
Mr. Sandesh Narayana Murthy set the right tone for the webinar by presenting a brief overview of the Indian MSME sector and its relation to the Rooftop Solar industry. Highlighting the contribution of this sector towards the Indian economy (e.g.: 30.7% share in the GDP (Gross Domestic Product)), Mr. Murthy further noted some of the adoption trends for Rooftop Solar in the sector, which largely covers the following industries: Rubber, Plastic, Pharmaceuticals, Automobiles, Paper, Food & Beverage, Textiles. Uptake of Rooftop Solar adoption across certain industries such as spinning mills, rice mills, cashew factories have been highly encouraging. Further, in the wake of COVID-19, surge in power demand for many hospitals and FMCG companies indicate significant potential for Rooftop Solar adoption. In regard to Rooftop Solar financing, Mr. Murthy said that most MSMEs prefer attractive finance options such as deferred payments, EMI schemes and bank guarantees for performance of solar plants. Also, commenting on the key adoption barriers for MSMEs, he mentioned that impact of COVID-19, uncertainty in state policies, lack of consumer awareness on Rooftop Solar, collateral requirement by lenders, etc. are some of the main reasons hindering the growth of Rooftop Solar adoption in MSME sector.
Mr. Ravinder Singh described the challenges and demands of the MSME sector concerning Rooftop Solar. An underserved sector in the market, the MSMEs, however represent 20-22% share of Tata Power’s total revenue. One of the critical challenges facing Rooftop Solar adoption in MSME sector is the uncertainty around net metering provision. It is quite essential for SMEs to have access to this provision. This is especially so since these companies typically work for only about 300 days in a year (given that they usually function 6 days per week and are shutdown on national holidays) and hence, energy generated from Rooftop Solar during the rest of the 65 days cannot go unutilized. Mr. Singh further seconded on the point that lending institutions asking for collateral on loan is a deterrent to Rooftop Solar adoption for MSMEs. From the financing point of view, he added that the sector typically has four requirements:
- Non-collateralized funding
- Longer loan tenure
- Interest rate typically lesser than 10%
- Faster loan approval with minimum paperwork hassle.
It was also pointed out that the ‘subscription model’ is also being explored wherein with minimal upfront CAPEX or buyback value, EMIs are tailored in a manner so as to have the monthly outflow equivalent to the monthly electricity cost savings.
Mr. NP Ramesh from ORB Energy expressed his company’s experiences from the Rooftop Solar financing perspective. While believing that the consumer awareness on benefits of Rooftop Solar having improved in the MSME sector, he concurred on the viewpoints put forth by the previous speakers. He also observed that the time taken for decision-making concerning implementation of Rooftop Solar project by the business proprietors is generally very long (sometimes even stretching to 3-6 months) due to inefficiency in prioritizing their requirements. In order to provide enhanced accessible funds to the MSME sector, the company had introduced innovative non-collateralized financing scheme.
- The turnaround time for granting credit under this scheme is as low as 7-10 days.
- The tenure could vary between 2 and 5 years, with the interest rates being around 12%.
- The down-payment on the loan would be between 0% and 25%.
Mr. Ramesh added that Orb’s financing business contributes about 40% of the company’s overall revenue. Speaking on the potential drivers/interventions needed for Rooftop Solar adoption, he remarked that there is a need for policies to be consistent at least for a period of 5 years and also recommended provision of attractive tax benefits or financial incentives tailored for the MSMEs. Pivoting to the factors that have led to Orb Energy’s innovative financing scheme become a successful one, Mr. Ramesh highlighted that the credit options offered by the company are tailored to not have the customer spend more than what they had already been paying as electricity expenses. The EMI structured, is therefore lesser than the monthly electricity cost savings. Furthermore, continued AMC (Annual Maintenance Contract) service for service infrastructure ensures that the customers continue to earn the benefits of Rooftop Solar which they would own. He also mentioned that the Textile, Food and Packaging are some of the key industries in which there is substantial Rooftop Solar adoption growth and/or adoption potential.
Mr. Shobhit Rai shared his thoughts on procurement of solar power by MSMEs while keeping the Open Access (OA) medium under the spotlight. He opined that in states having favourable policies for MSME sector, implementation of solar projects through OA mode need to be encouraged. It was also suggested that the cap of 1 MW capacity for OA plants by the respective state governments be removed for MSMEs. This would act as a major catalyst to adoption of solar through OA captive route specifically by profitable MSMEs. In addition to this, from the financing point of view, Mr. Rai added that the prospect of creating a distinct pool of fund by lending institutions for offering non-collateralized loans to MSMEs should be explored and the necessary steps be taken for actualization of the same.
Click here for webinar recording.