Rs 22,000 per kW Solar Rooftop in Punjab. Reality Bites

Rs 22,200 per kW. Yes, that was the final rate arrived at after a call for grid-connected solar rooftop bidding from vendors looking to get empaneled with the Punjab State Power Corporation Limited (PSPCL).

This was after the  L1 rate of Rs 37,000 received  for 1 kWp – 10 kW category. After the 40 percent subsidy, the rate effectively became Rs 22,200 till 3 KW. For beyond 3 KW to  10 KW, the subsidy rate is 20 percent. On paper, that means a residential rooftop solar system of 1 kWp in Punjab should be just Rs 22,200. A price that almost everyone seems to agree with should shake up the rooftop sector. Or will it?

At the end of the exercise, PSPCL empaneled 211 vendors who are eligible to install these subsidized grid-connected rooftop solar systems for residential consumers. The subsidy will be given to the installer or vendor and consumers just need to pay the net amount of Rs 22,200 for 1 KWp. For comparison sake, the successful solar rooftop push in Gujarat discovered a price of Rs 28,000 per KW(with subsidy), and Rs 37,000 for above 3 kW.

We decided to speak  to some of the empaneled vendors listed on the PSPCL site, and the response surprised us. Quite simply, contrary to the media hoopla, this ‘amazing’ rate is not going to work, apparently.

Speaking on condition of anonymity, our first vendor said that “most of the installers are not interested in installing on such low prices because at Rs 37,000 we are not getting any margins and we are just getting our costing complete. So, it becomes very difficult to continue our businesses if we are not getting margins.” This assumes added significance when one takes into account the time taken to disburse subsidies by the authorities. Most vendors we spoke to gave a figure of between 3 months to a year, with time taken getting extended in case of any query raised by the inspection engineer, or otherwise.

In the past, vendors have claimed that some of them had to go out of business due to payment delays.

Then, there is the curious case of the government’s own estimate of the right price. At an upper price cap of Rs 54,000, the ‘discovered’ price  is over 30 percent less than the government price. That speak a lot about the governments own estimate ability too. In fact, vendors with a national footprint based out of Delhi lamented that it is ‘unreasonable’ prices like these that lead to confusion, and delays in other states too.

“Though the upper cap was put at Rs 54,000 by the government but there should be some lower cap also and government should do some study on how such lower prices can be feasible. If one or two installers quoted such prices why others are not able to actually work on such prices. What is the ground reality? This should be checked by the government,” he added.

While talking on the matter, another Punjab based installer, who installs upto 3kW systems, agreed, going so far as to say that that “We are not taking orders as on such low prices we are not able to get even our costings. We have raised the issue with the government let’s see what will happen…”

“Right now we are unable to get profits in our business because we have to meet many expenses including maintenance cost, interest rate on bank loans etc..The initial installation has to be done from our own funds and we get our margin from the subsidy received from the government. At this new price, there are no margins” he added.

He further said “even on time frame for release of subsidy payments, nothing has been given in writing. Only verbal insurance that it will be within a year. That is not good enough for most vendors today”

“Earlier, when the subsidy was granted on the name of consumer (so the consumer would pay whole amount upfront) we were not in such a difficult position but since when subsidy is provided to installers we are in such a stressful situation,” the installer commented.

In fact, some vendors went so far as to say that  the only way this scheme could show results, was if customers agreed to the reality of challenges faced by vendors, and paid them separately for some services. Because for getting the subsidy, they have no option but to upload prices based on the auction. Six out of the seven vendors we managed to speak to were skeptical of the success of the scheme.

Most vendors seemed to be counting on getting their customers to ignore the subsidy altogether of needed, on the pitch of better quality equipment, a service contract post-installation, and a net metering connection, which is independent of the subsidised installation.

At an effective rate of Rs 32000 to Rs 35,000 per KW  without any subsidy, many believe the 1-3 KW segment will still work for them. With average power rates in the vicinity of Rs 5 to Rs 6.50 for consumption between 0-100 and 100-300 units respectively, Punjab already has some of the highest rates for residential energy. That means, the payback period for a net metering system upto 3 KW can be quite fast, at 3-4 years. In fact, the only saving grace in this whole issue was the confidence of installers with regards to the availability of equipment for work.

Clearly, this is one state where the price discovery may just have gone too far and will do more damage to the solar rooftop movement than benefits.