Future of Residential Solar: Post Covid Period

Till Dec 2019, India was having 757 MW of cumulative installed solar capacity by the residential segment, out of 5440 MW of rooftop solar (RTS).

As per Phase II of Grid connected RTS implementation plan by MNRE released in Aug 2019 last year, India has set for itself a modest and calculated target of 4GW of installed solar capacity by residential sector for its 2022 renewable energy targets.

But, if you compare the growth of solar adoption in residential sector, it’s not very great, and definitely not good enough to take us to the above target of 4GW by 2022.

Ref. Source: Bridge to India RTS Maps

If you see the y-o-y of growth rate of residential sector, it has increased gradually, from 14% in 2016, to 11%, 10% and 12% in the years 2017, 2018, 2019 respectively as per the latest capacity addition report by Bridge to India. So, it is not so great after all.

All this growth about rooftop solar that is circulated, around 70% of it is being fuelled by commercial and industrial (C&I) sectors. So, in reality, it’s the C&I segment that is responsible for gaining appreciation countrywide.

Ref. source: Bridge to India RTS Maps

Looking closely, as compared to last year (2018), India has added 184 MW installed capacity in year 2019.

Road ahead

Residential segment in India has always been enjoying lower tariffs as compared to all other segments, so unless the subsidy provided is really high, adoption of solar is going be gradual, the way it has been, which is why MNRE in its latest guidelines for Phase II of RTS, is offering straight 40% subsidy of the benchmark cost for first 3KW solar system, followed by 20% for the next slab, which is above 3 KW upto 10 KW.

Many states are coming up with tenders for quicker adoption of residential rooftop solar and also to avail benefits of Central Financing Assistance (CFA) by MNRE. Some of the states are even offering state subsidies over and above MNRE CFA to make the rooftop solar more attractive for consumers, but still there are many hurdles.

States that have floated tenders to avail CFA under RTS segment are as follows

Gujarat1 – 600MW in residential segment

Delhi2 – 24MW of residential segment

Madhya Pradesh3 – 45MW for residential segment

Assam4 – 8MW for residential segment

Bihar5 – 5MW for residential segment

Punjab6 – 10MW for government & private segment

Uttar Pradesh7 – 60MWfor RTS

Gujarat is the leader when it comes to rooftop solar installations by the residential segment. Out of total 79,950 residential RTS customers availing subsidy, a biggest pie of 64%, around 51,000 customers are from Gujarat .This is followed by Maharashtra with just 5500 residential customers availing subsidy in this segment. Both demand side as well as supply side constraints are one of the main reasons attributed for this scanty growth. When I say supply side, that would include state policies, such as net metering caps, lack of willingness by DISCOMs towards RTS etc. and demand side include lack of awareness and available information about solar power among the consumers.

How does COVID-19 affect this growth?

India has surpassed the 16% tipping point on the product diffusion curve. So, if we assume 2022 target of 4GW by residential segment as the total available market, out of that 757MW is already installed as on Dec 2019.

So, any more installations happening after 640MW are driven by the fact that customers who lie after initial innovators and early adopters, belong to the early majority category. These are the kind of people who adopts a product based on its use and recommendation by the innovators (top 2.5%) and early adopters (next 13.5%).

They are someone with lesser risk appetite, and would only buy a product, when situation is kind of perfect, unlike present times of uncertainty, less liquidity in the market and consolidation phase of the highly fragmented solar industry.

Solar plant being a high involvement product with a life of more than 25 years, will come after health, food, housing which has become the topmost priority for many of us now which also includes this early majority. These are also the people that will determine the ultimate success of the innovation/ product. So, it is a make or break situation.

Raghuram Rajan in one of his recent webinars, conducted by IMF has said that there will be reduction in discretionary spending by the individuals. Ticket size of the spending will also reduce significantly. Solar plant being a product which is not a necessity and also the cost, being on the higher side, will take a backseat for now, with health and safety becoming top priorities. Customers will although, not reject the idea of solar altogether, but will delay the decision making regarding solar installations for some time now.

Having said that, it does not mean that people are not going to buy solar plants anymore, its just that it is being delayed for the time till situation becomes normal and people get to their initial spending capacities. Until then, we as developers should use this available time afforded to us due to lockdown in increasing awareness about solar and benefits a consumer will get after its installation. As per our experience so far during our interactions with potential customers, we still spend 30-40% of our time teaching them basic benefits of getting a solar plant. This will not only help them in making better and quick decisions but also help bring solar industry on track by closing sales quickly.