“Penetration In MSME Low, Market Untapped for Solar Rooftop Plant Developers,” Vikas Agarwal, Credit Fair

Vikas Agarwal, Co-Founder & CBO, Credit Fair

Vikas Agarwal, Co-Founder & CBO, Credit Fair

With a transition in power consumption patterns worldwide due to climate change and the limitation of fossil fuels, the importance of green sources such as solar energy has increased significantly in the past few years. However, the initial installation cost often is a significant limitation for the widespread adoption of solar technology in residential and industrial projects. For manufacturing concerns such as factories, the set-up costs can be supported through multiple financing alternatives.

The trends in solar rooftop financing in the industry have been largely positive. For instance, the solar rooftop market grew by 53% in the twelve months from July 2020 to August 2021. The expected CAGR is around 15% in the next few years, primarily influenced by subsidies and the availability of affordable finance.

Here are the most critical highlights of the developments in the field in the past few years:

Significant increase in funds availability

Rooftop solar project developers have accessed funds of more than $2 billion from debt and equity (until 2021). Interestingly, most funds were raised during FY 2021, and the trend continues today. Furthermore, around 99% of the equity investments have been poured in by foreign investors as the growth potential of the Indian market, with a high expected CAGR, is quite bright.

Multiple ways of accessing funds for installations

The developers have raised funds from equity, debt, corporate restructuring, and concessional credit lines. This further implies that the benefits of funds from multiple sources can be easily passed on to the consumers. Besides distribution companies, many start-ups have joined the bandwagon as the number of solar rooftop service providers has increased consistently in the country.

Support by the Indian government and international bodies

Both central and state governments provide subsidies and support to multiple industries for installing solar rooftop plants. In general cases, the central government can provide financial support up to 40% (up to 10 KW plant) of the total cost of installation. State-wise subsidies and financial support are also available, reducing costs and increasing adoption rates by industries.

Enormous scope in the MSME sector

Currently, the rate of penetration in the MSME sector and industries is quite low, meaning that a huge market remains untapped for solar rooftop plant developers. With the increase in popularity, availability of easy finance, subsidies, and emphasis on sustainability, the MSME sector can be one of the biggest consumers of green solar energy in the future. Hence, the financing sector will cater for a massive consumer base in the next decade.

Summing up

The trends in solar rooftop financing are largely positive, with increased demand for green energy, increased price of fossil fuels, and support by the government. This has been demonstrated by the segment’s growth trends and an overall increase in demand for sustainable and green energy around different sectors in the country. With MSME and residential consumers remaining largely untapped, the broad scope of financing shall further increase shortly.

Vikas Agarwal is Co-Founder & Chief Business Officer at Credit Fair