Prime Minister Narendra Modi just announced an ambitious new scheme — the Pradhan Mantri Suryodaya Yojana. He wants to see solar panels on the roofs of 1 crore homes!!!

And in today’s Finshots, we tell you all about India’s rooftop solar ambitions and the hurdles in its path.

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The Story

Indians are using a lot more electricity than before. The per capita consumption is rising at a fast clip.

But unfortunately, 70% of our electricity needs end up being fueled by coal. Now we don’t need to explain to you that coal is a dirty fossil fuel that spews a lot of harmful emissions during its use. So you can’t claim that it’s environmentally friendly. Also, another issue is that we end up importing truckloads of coal to meet our needs — we spent a gargantuan sum of nearly ₹4 lakh crores last year on imports.

So by switching away from coal and to solar energy, we kill two birds with one stone.

We have sunlight in abundance and can simply tap into this free natural resource. Some reports say there’s no other country in the G20 — which is an informal organisation of some of the top 20 economies in the world — that receives more sunlight than us. And in this way, we get to fulfil the renewable energy promises we’ve made to the world while saving our valuable foreign exchange reserves too.

That’s why everyone’s excited about the new scheme.

But hang on a minute…we already had a scheme to promote rooftop solar initiatives, didn’t we? Whatever happened to that?

Well, you’re right. In 2014, the government did go all guns blazing to promote a solar mission. It wanted to see 100 gigawatts worth of solar panels powering India’s energy needs. And it wanted 40 GW of it to come from rooftops.

Just to be clear, rooftop solar doesn’t just mean people’s homes. It includes even small commercial buildings and office spaces.

But the thing is, even as of December 2023, we only had around 11 GW of rooftop solar in place. And to make things even worse, residential spaces accounted for a measly 2.7 GW of this pie.

We were way behind schedule.

So why were households so slow to embrace solar power, you ask?

For starters, there was a lack of awareness. Even today, as per a study by CEEW (Council on Energy, Environment and Water), less than 60% of people know about how these solar systems work. So without efforts to educate people on the long-term benefits, you’re definitely going to face pushback.

Especially since these solar panels don’t come cheap.

A typical home in India needs around 3–5 kilowatts of power. And setting up the solar panels needed for just 1kW costs around ₹51,000 as per government data. This meant a household would have to shell out anywhere between ₹1.5–2.5 lakhs to set these panels up on their rooftops.

Now if you’re setting up a new home, you’ll probably tack on these costs and go ahead with installation. But for existing homes, you’d think twice before taking up the financial burden.

Okay, but didn’t the government subsidise these installations?

They did. They were trying to make it more affordable. But in many cases, the subsidies didn’t hit the consumer’s bank accounts on time. There were inordinate delays. Now you can imagine that people would’ve discussed these with their neighbours too. The word would’ve spread and people would’ve grown even more wary. The trust deficit builds.

And you don’t really want to take a loan to finance this endeavour, do you?

Now even if you wanted a loan because you realised that you could cut your electricity bill, loans weren’t easy to come by. Banks and financial institutions didn’t focus on special ‘solar’ loans. So people would have to resort to personal loans that came with high rates of interest.

Ergo, it simply didn’t make sense for a lot of folks.

And there was one more problem — setting up ‘on-grid’ solar.

This simply means connecting your rooftop solar units to the country’s electricity grid. That way, when the sun is shining bright, the excess electricity can be transferred to the grid and others can use it. And the person could earn money off of this too. Maybe by way of a deduction on the final electricity bill.

But to do that, you needed buy-in from Discoms (Power Distribution Companies). These are the folks who ensure electricity gets to where it’s needed. Such as your house. So they’re in charge of all the infrastructure needed — the transformers, the power cables, the utility grid that could tap into your solar system, all of that stuff.

But the issue was that Discoms weren’t a big fan of the shift towards solar.

Why, you ask?

Well, most of them have long-term agreements with the Gencos (the ones who make the electricity). And they purchase the electricity at a predetermined quantity and rate. So they’re stuck. And if consumers start using solar power en masse, they’ll lose out on revenue. So every time you seek the Discom’s approval to set up a rooftop solar system, they would sit on the application for ages and delay approval.

So yeah, all these problems put a spanner in the works of our rooftop solar ambitions. And we don’t know how much of this is really sorted now. The issues could crop up again as we strive to hit the 1 crore mark.

But the real question is — is getting to 1 crore households feasible or is it just a gimmick?

Well, the CEEW report had something else that was quite interesting. They divided the Indian residential solar market into 3 parts.

  1. What if all suitable rooftops were covered end-to-end by solar panels? That’s the technical potential. And they say this could be worth 637 gigawatts (GW).
  2. But we know that’s not possible so we need to look at potential through the lens of economic viability. When they did this, the market narrowed to 102 GW.
  3. Finally, we need households to agree to this. And for that, they’ll conduct an analysis of the trade-off between the upfront costs they have to bear today versus how long it’ll take to recoup the costs through electricity savings. This is the true market potential. And this could be just 11 GW without any subsidy.

So, how many households would that entail?

Well, let’s make some assumptions to get there. We already told you that a typical household needs 3 KW worth of solar units to run effectively. But, let’s assume that if you include rural and urban areas, the average drops to 2 KW.

Based on that, we have roughly 55 lakh households with this market potential currently.

That’s not enough to meet the ambitious new goal, is it?

So what’s the way out, you ask?

In one word — subsidies.

The government already provides incentives for people shifting to solar, but they might have to do more. They might have to ramp up the money being doled out by a fair bit.

Especially since a few state governments have resorted to doling out free electricity too. I know families in Bengaluru who receive a ₹0 electricity bill every month now based on their consumption. Why would they take the hassle and cost of installing solar panels on their roofs now?

So yeah, hitting the magical 1 crore figure isn’t going to be a walk in the park. But let’s cross our fingers and hope for the best, shall we?

Until then…

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