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My Neighbour Has Rooftop Solar. I Want It Too.

Rooftop solar owners in Mumbai are happy with the cost savings. Then why don't we see more panels atop buildings?

<div class="paragraphs"><p>Solar rooftop installations at Dheeraj Dreams 3 in Bhandup, Mumbai. (Source: BloombergQuint)&nbsp;</p></div>
Solar rooftop installations at Dheeraj Dreams 3 in Bhandup, Mumbai. (Source: BloombergQuint) 

An aerial view of Mumbai's Bhandup suburb reflects an oasis of blue. Solar panels atop a cluster of buildings glisten in the sunlight amid a brown expanse of concrete.

It all began in 2018 when the Dheeraj Dreams 2 housing complex, overlooking Thane creek, commissioned a 200-kilowatt solar rooftop plant for their four 20-storeyed towers. It was the city’s largest such installation in a residential complex at the time.

"We had been looking to cut costs for a while," Sanjay Tari, chairman of the residential society, told BloombergQuint. "When we looked at our bills, going solar was a no-brainer. Our annual electricity bills have now come down from Rs 52 lakh to just about Rs 19 lakh."

Once Dheeraj Dreams 2 installed the panels, members from other housing societies in the neighbourhood started visiting to understand the benefits. "The cost saving on our electricity bills spoke for itself," Tari said.

Now, four other housing societies—Dreams 1, Dreams 3, Mahavir Universe, and Mahavir Phoenix—located within half a kilometre of each other, have installed solar panels. Together, the 18 buildings have a peak capacity of over 700 kilowatts, enough to power a medium-sized industrial unit.

<div class="paragraphs"><p>Rooftop panels atop Mahavir Unverse in Bhandup, Mumbai. (Source: BloombergQuint)</p></div>

Rooftop panels atop Mahavir Unverse in Bhandup, Mumbai. (Source: BloombergQuint)

Still, the success of rooftop solar in Bhandup's high-rise neighbourhood belies the full picture.

Installing rooftop panels is one among many policies to wean Indians away from dirty fossil fuels, and it dovetails with the nation’s plan to clean up the air. Yet, there is not much awareness and adoption is slow. India has only 6.5 GW of rooftop solar installations—way less than the 40 GW it had targeted by 2022. Maharashtra, India's second-largest state by rooftop solar capacity, has less than 1 gigawatt of panels installed.

"Consumer awareness, even though gradually improving, is unfortunately very low," said Gautam Das, chief executive of Oorjan Cleantech, a solar engineering, procurement and construction company that executed three of the five projects in Bhandup. "This is a new ecosystem and masses still don't know the cost benefits that come with it."

<div class="paragraphs"><p>Panel installation by Avishakti Solar at Mittal Towers, Nariman Point. (Source: BloombergQuint)</p></div>

Panel installation by Avishakti Solar at Mittal Towers, Nariman Point. (Source: BloombergQuint)

Neither government subsidies, nor rebates by city and state administrations have helped. The only means of publicity working so far is word of mouth.

Take Mumbai's Nariman Point, for instance. Three years ago, Mittal Tower, a commercial office space next to Marine Drive, commissioned Avishakti Solar for a 120 kW solar installation. Soon, seeing the cost benefits, three adjoining commercial buildings by the same developer also had solar rooftop panels.

For consumers in Mumbai, the solar pitch is very clear: saving money. However, the commitment to go solar is more often prompted when they see a neighbour reap tangible benefits.

Consume Less, Save More

The cost advantages of rooftop solar panels come from a concept called net-metering. Installations are connected to the power grid of the electricity distribution company. All the electricity that is generated off the panels is fed into the main grid. That is then offset from whatever electricity is being consumed by the rooftop installation owner and a bill is generated.

For instance, if a building generates 100 units of electricity through solar and consumes 150 units from the grid in a month, it will only have to pay for 50 units. In cases where generation is higher than consumption, the surplus is carried forward by the power distribution company and adjusted in the next month's bill.

Srikanth Swaminathan, a member of the managing committee for solar installations at Mahavir Phoenix complex in Bhandup, said their monthly consumption reduced from about 21,000-22,000 units of electricity to a net of 11,000 units. "The math is in our favour."

<div class="paragraphs"><p>Srikanth Swaminathan of Mahavir Phoenix in Bhandup. (Source: BloombergQuint)</p></div>

Srikanth Swaminathan of Mahavir Phoenix in Bhandup. (Source: BloombergQuint)

The difference is more pronounced for housing societies. Discoms or power distribution companies have a tier-based system for tariffs, where those who consume above a certain threshold are charged a higher rate. This means that common electricity consumption in buildings from elevators, water pumps and lights costs more than that of individual flats.

Tari said that roughly the society pays Rs 15 per unit of electricity compared to about Rs 8 per unit for individual households. "When we put it that way, it became easier to convince the residents of the society," he said.

My Neighbour Has Rooftop Solar. I Want It Too.

Still, the rooftop solar societies of Bhandup, according to local real estate brokers BloombergQuint spoke to, mostly comprised residents who are financially better off than most Indians. For such upper middle-class and higher group of residents, incurring steep upfront costs for installing solar panels is manageable. But that may present a challenge for others.

Barriers To Entry

The installation at Dreams 2 had a total project cost of Rs 1.26 crore. While the society bore a cost of Rs 90 lakh, the remaining Rs 36 lakh came from the central subsidy provided by the Ministry of New and Renewable Energy.

Funding wasn't a big hurdle as the society already had a fixed deposit of Rs 1 crore in a co-operative bank. It was able to avail financing against that fixed deposit through an overdraft facility.

Within three years, the society could recover the costs from savings and pay back the loan. "Now, we discount a monthly Rs 500 on society bills to each of the 546 flats," Tari said.

Dreams 1 and 3, too, used a similar overdraft option to fund their own projects. On the other hand, Mahavir Phoenix was able to raise funds from its residents. "Most large societies are required to keep a fixed deposit account. It shouldn't be hard for them to avail overdraft on that for solar (plants)," Swaminathan said.

That doesn't change the fact that going solar is a costly affair. "Not only is it mostly unaffordable, there's also a lack of easy financing options," said Vinay Rustagi, managing director of the renewable market research firm Bridge To India.

There is reluctance to spend for a product which is not really considered a necessity.
Vinay Rustagi, MD, Bridge To India
<div class="paragraphs"><p>There are other overhead costs with solar installations like inverters,  solar optimisers and regular maintenance. (Source: BloombergQuint)</p></div>

There are other overhead costs with solar installations like inverters, solar optimisers and regular maintenance. (Source: BloombergQuint)

And the cost of solar components is only going up, according to Animesh Manek, chief executive officer and managing director of Avishakti Rooftop Solar, which installed the plants at Mittal Tower.

Supply chain strains due to the pandemic had already caused a spike in prices of everything from solar photovoltaic modules to inverters, Manek said.

Now, the central government has also imposed a basic customs duty of 40% and 25% on imports of solar modules and solar cells respectively, in an attempt to boost domestic manufacturing. At the moment, solar installations cost around Rs 45,000 per kilowatt, but that could rise, he said.

According to Das, since domestic manufacturers can only contribute less than a quarter of the demand right now, most people keen to install the panels will be forced to import. "When you have huge targets, you have to rely on imported components. This could've been better managed."

Besides, the government will only offer subsidies if the panel used is from a brand named in its Approved List of Module Manufacturers. The policy will be implemented from later this year. That means several projects like Mahavir Phoenix, which have used panels from Germany, will be unable to get subsidy benefits.

It shows up in the numbers too. The Maharashtra State Electricity Distribution Co. was supposed to get 25 MW worth of subsidies from the central government. Till February, it had only availed it for 2.3 MW of rooftop solar projects.

On top of rising costs, the lack of big players in the rooftop solar space is also keeping customers at bay, Rustagi said. "The people supplying rooftop solar systems are mainly small, local contractors. Consumers do not feel comfortable making such expensive purchases from them."

<div class="paragraphs"><p>Solar installation at Dheeraj Dreams 3 in Bhandup, Mumbai. (Source: BloombergQuint)</p></div>

Solar installation at Dheeraj Dreams 3 in Bhandup, Mumbai. (Source: BloombergQuint)

Uncertainty In Policy

Policy flip-flops at the central and state level have not helped either. Before December 2020, net metering was limited to projects up to 1 MW capacity, after which the Ministry of Power reduced it to 10 KW. After facing criticism from the industry and the solar lobby, it later increased it to 500 KW.

MSEDCL, too, has made a U-turn on its net metering policy by disallowing commercial consumers from availing it, and later rolling it back.

Then comes the ever-present red tape of Indian bureaucracy. Cash-strapped discoms have been lethargic in granting approval to rooftop solar projects, and there are issues pertaining to a mismatch in bills.

Swaminathan said that at Mahavir Phoenix, the installation was completed by April 2021, but they got their first correct net meter reading only in August. "We had to go back and forth with Mahavitaran over reconciling our bills. Thankfully, now it's not the case anymore."

<div class="paragraphs"><p>Solar installation at Dheeraj Dreams 1 in Bhandup, Mumbai. (Source: BloombergQuint)</p></div>

Solar installation at Dheeraj Dreams 1 in Bhandup, Mumbai. (Source: BloombergQuint)

"Discoms don't want to lose their high-paying customers to rooftop solar. That means lower demand for the grid and hence, they generally have a negative view on rooftop solar," Rustagi said. "Perhaps that is why they are trying to influence policies in such a way that this market does not grow rapidly."

MSEDCL Superintending Officer Dnyanesh Kulkarni told BloombergQuint that it is not favourable for the discoms if their high-paying consumers switch to solar, since that means taking a revenue hit. However, he said that there is no attempt from discoms to dissuade consumers from shifting to solar power.

The Road Ahead

Despite the hurdles, rooftop solar adoption has started to pick up in the country.

In 2021, India added a record 1.7 GW of solar rooftop capacity, with residential installations accounting for 35%, according to Mercom India.

Mumbai, as part of the Climate Action Plan, is developing a road map for increasing solar adoption by mandating up to 25% renewable energy requirements for buildings. It estimates that rooftop solar can provide 1.7 GW of power to the city—nearly half of its peak demand. It expects 75% of that to come from residential installations.

<div class="paragraphs"><p>Mahavir Universe and Dreams Housing Complex in one frame. Every building in this picture has a solar installation. (Source: BloombergQuint)</p></div>

Mahavir Universe and Dreams Housing Complex in one frame. Every building in this picture has a solar installation. (Source: BloombergQuint)

Subrahmanyam Pulipaka, CEO of the National Solar Foundation, said that they are going to launch a pan-India awareness campaign for the next three years, covering 100 cities. "We have set a target of 100 GW of residential rooftop solar by 2030. We have the potential to double solar capacity every year, and that will have to be driven by rooftop installations."

Less regulation would help too, said Vibhuti Garg, energy economist and India lead at the Institute for Energy Economics and Financial Analysis. "Our proposition is to let the market develop first. Let a good amount of capacity be installed, and then impose these restrictions," Garg said. "The policies have to act as an enabler rather than killing the market too early."

As for the consumers, they are quite content with their leap of faith. "We couldn't be happier that we did it when the opportunity came to us," Tari said. "For 25 years from the date of installation, we will be able to save a significant amount of money. I couldn't ask for anything more."