India is moving towards becoming a global solar superpower. The country has set itself the ambitious target of generating 100GW of solar energy by 2022, 40 per cent of which is to come from rooftop solar projects. But how is the Indian solar industry performing? Can it make this dream come true? Shravan Sampath, CEO of Oakridge Energy, in an interaction with Baishakhi Dutta of Electronics Bazaar, shares how the organisation is aiming to build a stronghold in the solar rooftop category.
EB: Do brief us about your organisation and the business model that you follow.
We started doing solar installations in 2015-16, though the solar business in India started in 2009-10, under the National Solar Mission of the government of India. The impetus given to the solar industry has increased dramatically in order to phase out fossil fuels. The government has set a target of generating 100GW of solar power by 2022, of which 40GW is to come from rooftop solar. We work with institutions, schools, colleges as well as homeowners and use their rooftops for generating solar power, delivering savings via lower electricity bills. We were empanelled by the government of India in 2015 and from 2016 onwards, we have been receiving a subsidy from the government.
Currently, we are not into manufacturing. We are solar contractors and developers. In the case of the former, it’s the client who pays the cost upfront, and gets solar panels installed. We do the entire installation and guarantee the performance for five to ten years. As developers, we ourselves invest in setting up a solar plant. For example, in a building society or in a school, which we know has a proven track record of timely payments, we go ahead and install the facility by making our own investments and charge them for the electricity generated. This is how our business model works. We are also into the maintenance business. So when the client wants us to take charge of maintaining the installation,
we do so.
EB: How is the solar rooftop market performing in India?
In the last two years, there has been a dramatic increase in the electricity tariff because of various factors. So now the business case for solar power is very good. We have lots of clients who pay no electricity bills after going the solar way. In the solar rooftop market, we have an installed capacity of around 2.5GW, as of March 2018. Of this, 40 per cent are installations for the government, and the other 40 per cent are industrial and commercial installations; the remaining 20 per cent are residential. The residential segment is the fastest growing now—it used to be about 10 per cent of the total market two to three years back. So this segment is growing faster than the rest of the market, in general. Currently, the Indian solar market is growing with every passing day.
EB: At present, what is the adoption rate of rooftop solar in the commercial and industrial segment?
The adoption rate is good, since historically, the electricity bills are the highest for these two segments. Industries are charged more so that free power can be given to farmers, which is why the tariff is also very high. So the business case for industries to switch to solar has always been very strong and they get the depreciation benefit too. Because of this, for the last three to four years, the growth of solar has primarily been in the industrial and commercial sectors.
EB: Are SMEs actively adopting rooftop solar or is it the large players who rule the roost?
A solar rooftop system is a long term investment and takes three to four years to break even. Besides, the installation has a life of 25 years. So far, the interest has been primarily from large corporates like Walmart, Ikea, etc, who have large rooftops. SMEs have not opted for solar power that much as of now because of a number of reasons. First, the typical SME mindset is a 12-15 month payback time. Second, the availability of finance for SMEs is quite low. The government is trying to do a number of things like improving financing of solar power for SMEs so that they can switch to it, but there is a lot to be done yet. In fact, the SMEs constitute a huge, untapped market in India as far as solar power is concerned.
EB: Is the government trying to promote any loan facilities for SMEs?
There are lines of credit available from the World Bank and ADB, which are being operated through SBI, PNB, etc. The sole purpose of this is to help provide solar power to SMEs as much as possible. So the money is available. Channelising these funds remains a challenge, since a lot of vendors are still wary about the viability of solar projects.
EB: Does the residential sector get the same financial benefits as the industrial or commercial sectors?
The way any industry avails benefits is through net metering. So the economics remains the same for everybody. The residential sector used to pay very low tariffs to begin with, hence the success rate of residential solar power was comparatively lower than in the industrial and commercial sectors that paid high tariffs for electricity. Even today, in most of the Tier II and Tier III cities, you will find that the residential power tariff is around ₹ 4 or 5 per unit while the highest industrial slab is ₹ 7 to 8 per unit. So the reduction in the electricity bill has a much greater impact in industrial installations compared to residential buildings.
EB: Is the solar transmission infrastructure well developed in India?
The right transmission infrastructure is lacking. This is why the government is promoting rooftop solar power, where the consumption and generation points are the same, and a lot of money is saved with respect to transmission infrastructure. However, state governments generally allow you to install solar power that is a certain per cent of your connected load. For example, in UP, let’s say you have a 100kV connection; then you can install solar power up to 100 per cent of your load. But you cannot set up a 5-10MW plant on your roof. You have to keep in mind your level of consumption before installing a solar rooftop system. There are a number of checks and balances. There are no transmission constraints, however, simply because you are generating and consuming at the same place.
EB: Recently, the Supreme Court approved the solar safeguard duty. Do you think this will have an effect on domestic manufacturing?
This is undoubtedly a good step taken in the national interest. The Supreme Court order upholds the validity of the safeguard duty imposed by the government of India on imported solar panels and cells. While there will be a short-term impact on the price of solar panels and cells, we welcome the Supreme Court’s order as it provides policy clarity. This will enable us to quote prices to customers, and will enable the market to grow. In the long-term, the development of solar panel manufacturing capacity will go a long way in generating jobs and fulfilling domestic manufacturing targets; but at the same time, it has upset a lot of calculations. At present, India is not very good in manufacturing solar panels, and we find a lot of quality issues with Indian models.
EB: Do you think it was the right time to impose the safeguard duty? Or should India have waited for the market to develop?
There is no right time, as such. We have been talking about the safeguard duty since 2012 and it had to happen some day. Importing solar panels compromises our national energy security because all these panels are underwritten by Chinese manufacturers. What if they back off someday? It is true that many of us are not happy with this move and would have liked it delayed, but in the long term, the government did the right thing. In India, once something is done, it’s done.
Things will somehow slowly fall into place once a decision has been taken. Indians are probably the best in the world when it comes to adapting to changed circumstances. Therefore, people will eventually find out ways to deal with the change. In fact, I am hopeful that very soon India will see a spurt in domestic manufacturing since local capacity does not take long to develop. Large Chinese manufacturers like Trina Solar have taken sites in India and are in the process of setting up their manufacturing facilities in the country. So, hopefully, by the next calendar year, we will receive positive news on this matter.
EB: The Indian government has set an ambitious target of achieving 100GW of solar power by 2022. Is this viable?
It is not viable in the sense that when you target 100GW, you end up achieving 50 GW; and when you target 50GW, you end up achieving 25GW. So it’s a government’s way of planning. And such numbers also get investors excited. So it’s good for all of us to have lofty targets. This also indicates that the government is thinking in a very streamlined manner. Because when your target is relatively small, the government tends to ignore a lot of hindrances to achieving it. But when you have to achieve 100GW, then you plan with that kind of a canvas in your mind; so obviously it is helpful for all of us in the long run.
EB: Currently India has more solar installers and maintenance providers and fewer manufacturers. What will it take to turn the tables?
Implementation of the safeguard duty is something that will definitely boost local manufacturing. We lack financing for manufacturing. Large players easily get the financial aid. But it’s very difficult to get a loan to set up a 1GW panel manufacturing facility.
So the government should set up financing lines to promote panel manufacturing. This is very much needed.
EB: How has your business grown in the past few years?
It’s definitely a lot better than what it was. Interactions are very high in the urban centres. We have operations in Delhi and Pune. In these places, there is a lot of uptake for solar power. But in Tier II and III towns, the market is still growing. I hope that over a period of time, that too will improve. Over the next two to three years we are expecting the other markets also to develop properly. Since solar power is a capital-intensive product, its spread depends on the success stories of customers. So the sooner we deliver the benefits to the client, the faster we will grow.
EB: What is the roadmap for the next few years?
We aim to be solar developers. We are talking to a large number of institutions and societies across North India and developing projects for them. So we want to keep growing as a specialised developer, installer and maintenance provider. We have a roadmap to install about 15MW of solar power in the upcoming calendar year, which will be distributed across various rooftops in the country.