Mains Paper 3: Economy | Infrastructure: Energy, Ports, Roads, Airports, Railways etc.
From UPSC perspective, the following things are important:
Prelims level: Benefits of Solar Rooftops
Mains level: SRTs as an alternative to DISCOM power
- Most developed economies started their solar programmes by targeting household rooftops; as a result, they now have a sizable share of installations in the residential rooftop segment.
- China and India, on the other hand, have used large-scale solar installations in an effort to quickly achieve scale and simultaneously push down costs.
- In the case of India, this focus on large utility-scale solar seems to have become an unintended obstruction in the development of the rooftop segment.
Tapping the Rooftop potential
- India, though, does have an ambitious plan for solar rooftop or SRT, as it is called: a target of 40 gigawatts (GW) capacity by 2022.
- But so far, the achievement has fallen short of the goal.
- According to the Union Ministry of New and Renewable Energy (MNRE), only 2,158 megawatt (MW) of SRT systems had been installed in the country till December 2018.
Household use is far less
- The shortfall in capacity is compounded by the fact that a large proportion—70 per cent—of the installed rooftop systems is for commercial and industrial (C&I) customers.
- Residential consumers account for less than 20 per cent of the total installed capacity.
- There are clear economic considerations behind industrial and commercial consumers’ preference for rooftop systems.
- Solar rooftop power is cheaper than grid-supplied electricity.
- These consumers have the financial resources to make the necessary investments, which are sizable, to install SRT systems.
The RESCO Model
- The commercial users also have access to the Renewable Energy Service Company (RESCO) model.
- It is a model in which developers install the system on the consumers’ premises and sign a long-term contract to sell them electricity, under which they do not need to make any investments.
Benefits of SRTs
- Distributed solar rooftop systems, installed on individual residences, offer many advantages.
- They help minimize transmission and distribution losses, as the generated power is consumed locally.
- In large cities, they can act as a back-up, replacing polluting diesel generator sets.
- Solar rooftop can be harnessed for demand-side management (for example, time-of-day pricing to match household demand with solar generation).
- With falling solar prices and steadily increasing tariffs of distribution companies (discoms), SRT systems are being seen as financially attractive.
- SRT systems can offer reduced power bills for households; the gains may increase as tariffs are likely to keep going up.
- They provide environmentally friendly, inexpensive back-up supply of power (compared to DG sets), a big advantage, given the persistent supply interruptions in most places.
- They can result in lower transmission and distribution losses and improved grid management, since the generation is close to the point of consumption.
Problem of Finance
- Instead of these much needed policy initiatives and administrative interventions, the government has largely relied on subsidies to drive SRT installation.
- Most prospective customers either do not have the savings to cover the upfront costs, or are simply unwilling to invest, given the relatively large amount.
- Also, most customers do not have access to bank financing.
- Loans need to be made available, which requires significant capacity building of retail bank branches.
Various Policy Initiatives
- In recent years, the government has taken steps to improve the availability of loans for SRT projects.
- The RBI has identified solar rooftop as a priority sector for lending.
- Eight public sector banks have included SRT systems under their housing or housing improvement loans.
- Multilateral banks are providing concessional loans against sovereign guarantee to public sector banks to support subsidized lending to the segment.
- It is clear that SRT systems provide multiple benefits—to households, to the grid and even to discoms; promoting them, therefore, is a desirable policy goal.
- Solar rooftops, however, also face several challenges, as indicated in the preceding section: lacklustre growth, little consumer awareness, lack of innovative government policies or attention, bureaucratic hassles, and limited support from discoms.
- Sustained and broad-based efforts are required to promote SRTs.