Non-Utility Share Of Over 25% Stood Out In 2024 In India: SBI Caps

Investment bank SBI Capital Markets (SBI CAPS), in a report on non-utility solar in India, has hailed 2024 as the year when non-utility solar finally crossed the 25% threshold in India. Declining module and EPC costs, coupled with cheaper cells expanding off-grid potential, facilitate solar adoption. Non-utility solar is poised for significant growth, with annual additions anticipated to reach ~20 GW through FY27.

In 2024, Rooftop solar installations surged by 4.6 GW, reflecting a remarkable 53% y/y growth, while off-grid solar witnessed a 197% expansion. This escalating prominence of the non-utility segment can be attributed to a combination of factors, including a low initial base, supportive government policies stimulating both residential and commercial & industrial sectors, and enhanced affordability of distributed solar solutions. The report is optimistic about pathways to solar capacity additions of 50 GW annually between 2025-2030.

PM Suryaghar To Power Residential To Largest Share of Rooftop Solar

Residential rooftop installations may surpass other segments if the PM-SGMBY achieves its ambitious 30 GW target, says the report. This initiative, characterized by a substantial capital cost subsidy that accelerates payback periods by 4-5 years, has demonstrated early promise. The scheme possesses the potential to catalyze a Rs. 1.2 trn ecosystem, with manufacturers of essential components, including modules, inverters, mounting equipment, and electrical components, anticipated to be primary beneficiaries alongside project developers and EPC players. The latter are, on their part, cashing in on this expansive opportunity through the capex model (where customer finances and owns the farm) to take advantage of subsidies. Perhaps the only risk in our view comes from tardy state discoms and the non enforcement of Renewable Purchase Obligations (RPO) by many state regulators that could hasten the process further.

C&I Segment Being Driven Towards Decentralised Renewable Solutions

C&I entities collectively constitute three-fourths of the installed rooftop capacity. This ecosystem flourishes due to the inherent disparity between elevated C&I grid tariffs and reduced tariffs procured from third-party IPPs/captive plants. While several states have acknowledged the erosion of market share within their respective DISCOMs and implemented a series of open access charges, key states such as Gujarat, Karnataka, Rajasthan, and Tamil Nadu still offer a substantial 20% cost advantage for utilizing open access renewable power. Furthermore, captive arrangements enhance the economic appeal by exempting consumers from additional surcharges and cross-subsidy levies, thereby maintaining viability across most states.

The report, while offering a comprehensive overview of the growth in non-utility solar and factors behind it, does not really touch on the possible impact of lower energy storage costs, which could have a multiplier effect in the sector and more widely across solar as well, if prices ruling currently in China were to arrive in India as well.

The full report can be accessed here.