PM's new rooftop solar scheme holds promise, if correctly implemented

Multiple factors have kept households from adopting rooftop installations, but financial benefits might make them more interested this time

By Naandika Tripathi Forbes India Staff

Published: Feb 13, 2024 01:05:54 PM IST

Updated: Aug 14, 2024 05:16:41 PM IST

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Solar panel system for the domestic use of Solar Electricity in Bilimora, Gujarat. Image: Shutterstock

After the inauguration of the Ayodhya Ram temple on January 22, Prime Minister Narendra Modi announced the Pradhan Mantri Suryodaya Yojana (PMSY) later in the evening. The scheme aims to provide rooftop solar (RTS) power systems to 1 crore households, which will help poor and middle-income houses lower their electricity bills. On February 1, Minister of Finance Nirmala Sitharaman said in her interim Budget speech that the 1 crore households can get up to 300 units of free solar electricity every month, and save up to Rs 18,000 annually, while selling the surplus to power distribution companies.

For more than a decade, the government has been trying to boost the RTS power sector. The central and state governments have undertaken many initiatives, including policy, regulatory, fiscal, and financial measures, to promote RTS installations, but India missed its target to achieve installed capacity of 40 GW by 2022. The government has now extended this deadline to 2026. (See box.)

India’s total solar power installed capacity has increased almost 30 times since 2014, from 2.6 GW to 70.1 GW, according to the Ministry of New and Renewable Energy (MNRE) website; the RTS installed capacity was around 11.08 GW as of December 2023. Overall, the country has 6.7 lakh households with rooftop solar systems. Gujarat is among the highest adopters with 2.8 GW, followed by Maharashtra at 1.7 GW. Recently, Gujarat’s Energy Minister Kanu Desai said that 82 percent of the country's rooftop solar capacity lie within the state's borders.

Yet, RTS installations have been comparatively low in the residential sector due to various reasons. Installation is expensive; there is lack of awareness, and issues regarding implementation and administrative hassles around metering approvals persist; lack of timely disbursement of central and state subsidies is a concern, and some consumers are getting subsidised electricity from power distribution companies. The Karnataka government has seen a significant dip in the number of residential RTS installations in cities over the last few months, as many households started receiving either a zero bill or a subsidised bill under the state’s Gruha Jyothi Scheme.

Under the recently announced PMSY, homes need a minimum area of 10 sq m to install a 1-kW solar panel. A 40 percent subsidy will be given for installing panels ranging from 1 to 3 kW, and a 20 percent subsidy for panels ranging from 4 to 10 kW. One can apply for it through the national RTS website. State governments are actively promoting the scheme. For instance, Chandigarh has reportedly received 1,200 applications from residents who are keen on installing RTS.

At the 2021 UN Climate Change Conference (COP26) in Glasgow, India announced an ambitious goal of achieving net-zero emissions by 2070. In 2022, the government updated the country’s nationally determined contribution (NDC), a climate action plan, saying that India is aiming to achieve 50 percent of its cumulative power capacity from non-fossil fuel-based energy resources by 2030. According to the Global Energy Monitor, between 2008 and 2022, India has added the third-highest solar power capacity, after China and the United States, and the sixth-highest wind power capacity. However, during the same time, the coal capacity added has been more than double that of wind and solar.

The target of providing RTS energy to 1 crore households is grossly inadequate to fulfil the solar power goals under PMSY, says Sumaira Abdulali, convenor at Awaaz Foundation. The electricity needs generated by building targets of 7 crore new houses (of which 5 crore are nearly complete) alongside massive infrastructure building and electrification of vehicles dwarf the solar power generated by 1 crore housing units. “For the vast majority of people, their dependence on coal-fired electricity will continue. The Ministry of Coal website says, ‘Coal will continue to occupy the centre stage of India's energy scenario’.”

Also Read: How Budget 2024 can be a catalyst in charting India's green energy course

Through PMSY, the government is targeting significant job creation by having a more labour-intensive, house-by-house solar adoption. It is also aiming to counter the move by state governments of Opposition parties of providing 300 units of free electricity per household. These schemes started in Delhi with the Arvind Kejriwal-led AAP, followed by many other states like Punjab and Karnataka, explains Kuldeep Jain, founder and managing director of CleanMax.

“The financial benefits of RTS for a house are really good, but the challenge is the big upfront capital investment. That is why the sachet model works better in the Indian FMCG sector, rather than big bottles. If the upfront investment can be reduced, it will motivate more people to opt for RTS,” he adds.

Adopting renewable energy options is not a priority for many in India; people will adopt RTS if they see actual monetary benefits. But now that the finance minister is talking about saving costs, people might be looking at available RTS options and how much they will save, explains Promit Mookherjee, associate fellow, Observer Research Foundation. “The main thing is a massive outreach programme for RTS right now, which was very much needed in India because the support already existed; subsidies for residential RTS have been there for the last four or five years. The biggest push here is the amount of interest that it will generate.”

While the draft framework is yet to be announced, central public sector undertakings (CPSUs) will spearhead the residential solar installations under the PMSY. “With this scheme, it is expected that CPSUs will help create a bigger market of vendors and get into a power purchase agreement kind of settlement with homeowners, where the upfront cost of installations will be taken up by the CPSU. Homeowners will enjoy the dual benefit of receiving 300 units of free electricity while also receiving remuneration for the surplus electricity generated by the plant,” says Sharad Pungalia, managing director and CEO of Amplus Solar.

With awareness gradually picking up, the government should focus on addressing the concerns about initial installation costs, which would contribute significantly in meeting the extended deadline.