The hidden shadow on Solar Rooftop
The subsidy scheme for capacity addition has a broken design, right from tender requirements, issuance to the role of discoms in the process
By 2022, the government had announced graciously, phase II of it’s solar rooftop programme with a ambitious target of achieving 40,000 MW of installed rooftop solar capacity. As this year comes to an end, the current solar rooftop capacity of India is only about 6110 MW making the set target elusive.
In a recent review by the MNRE, most of the states have reported very negligible solar rooftop numbers compared to the target set. Consider Delhi, one of the most high-income city in India, achieved only 20% of it’s subsidy allocation of 30MW. The figure of subsidy allocation on a national level was about 3,000 MW solar rooftop out of which about 700MW has been installed. The MNRE missed it’s target by 77%!
Compare the figures with Vietnam who installed over 9,000MW in a single year the target on India was very nominal and should had been easy to achieve. Let’s try to understand why India lagged so much.
Much of this can been attributed to a policy framework that is designed to impose unreasonable conditions on the private solar installers, who ideally should be supported by the government. Under the current regime, each discom is responsible for solar rooftop installations in its own area, and tenders call for almost negligible qualification criteria. The lack of qualification criteria results in very aggressive bidding from players who don’t understand the costs involved in setting up a solar rooftop plant, and this ends up vitiating the market completely. Most experienced installers stay away given the unviable, unachievable tender prices and choose to work in a non-subsidy market or customer base.
Many discoms have devised a variety of bidding categories ranging from 1 KW to 10 KW as part of the tendering framework. Discoms have created a mess in the tender documentation in an attempt to collect all of the varied offerings that any solar firm has to offer. Solar atop elevated structures has even spawned its own bidding categories. If bidders are supposed to estimate their exact consumer profile over the next 12-18 months in this intricate procurement, they will need some astute astrological talents.
Residential solar plants must be cleaned and maintained by the solar installation for up to five years after commissioning, according to the tender, and the installer must also obtain insurance for the same period at the same cost! Plant performance ratios that are impossible to achieve in residential applications due to urban dust levels are requested of the installation. To tie all this in, the bidder is expected to give a stiff bank guarantee for five years which gets encashed if any of these above conditions are not fulfilled.
The most serious issue in the Phase II subsidy programme is that the pricing of residential solar rooftop systems are frozen for 12 to 18 months in advance. Given the extreme volatility of solar panel and other input costs, no one can make such a long-term pricing prediction. As a result, any pricing provided in tender papers is purely speculative. Furthermore, residential solar rooftop systems are very specialised and quality-driven, and many clients demand customisations at an additional expense. A one-size-fits-all approach fails to account for market inequalities. To put this in perspective, a 3kW sofar / solis inverter costs around half as much as a solaredge / fronius inverter. Although both inverters have advantages, no provision is made in any tender for charging customers based on the inverter installed.The discom's overarching function in the framework should also be reconsidered, given that the discom is always conflicted about what role it should play because it loses revenue from solar rooftops. It's best to limit the discom's responsibility and make the subsidy process as frictionless as possible with the fewest possible touch points. Currently, the installer receives the subsidy and bears the responsibility and risk of the subsidy. The subsidy, which can amount to up to 40% of the project cost, is a substantial financial burden on the installation. It would be more prudent to disburse the subsidy directly to the client, as was done previously. Why should solar rooftop be any different? Direct benefit transfer is used for subsidy disbursement in other government schemes, so why should it be any different for solar rooftop?
The government's fixation on micromanaging every installation may appear admirable, but it should not be done at the expense of shifting even the tiniest burden to the installer. While allowing credible and trusted solar providers to develop, the solar rooftop industry need a clear, transparent, and straightforward structure.
In an ideal world, net metres would be readily available on the market, with the discom's responsibility limited to inspecting the plant and sealing the metre. The consumer should be able to claim a subsidy based on his or her application to the government. Subsidies should be offered on demand and at a fixed price per KW, regardless of when the customer applies, and not tied to the duration of a tender programme. We can only hope to achieve our aim of 40 GW in the next five years by streamlining the programme.
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