Rooftop Solar in India
Looking back, Looking ahead
PwC2
Acknowledgments
The study was carried out by PricewaterhouseCoopers Pvt Ltd, India in collaboration
with the Climate Investment Funds.
The due diligence for this report was led by Mr. Amit Kumar (Partner-PwC India, Task
Team Leader) and Mr. Abhishek Bhaskar (Energy Specialist- CIF, Co-Task Team
Leader). The analysis was conducted and report was drafted by the clean energy team
from PwC comprising of Ms. Saachi Singla and Mr. Parteek Girdhar.
The team benefited from the strategic guidance, and insights offered by colleagues from
World Bank (Mr. Simon Stolp, Mr. Chandrasekar Govindarajalu, Ms. Mani Khurana,
Mr. Amit Jain and Mr. Yanqin Song), ADB (Mr. Jiwan Acharya, Mr. Christian
Ellermann, and Mr. Jigar Bhatt), IFC (Ms. Pratibha Bajaj and Mr. Andrey
Shlyakhtenko), and Climate Investment Funds (Ms. Mafalda Duarte, Mr. Jagjeet
Sareen, Mr. Zhihong Zhang, Mr. Joseph Dickman and Mr. Rafael Ben), among others.
PwC team would also like to thank the respective teams from ReNew Power, Amplus,
Dexler, Adani and CleanMax and banks/financial institutions including IREDA, SBI,
PNB, Yes Bank and Canara Bank for sharing their views on the rooftop solar scenario in
India.
Please address any questions or comments about this report to Mr. Amit Kumar
(amit2.kumar@pwc.com) / Mr. Abhishek Bhaskar (abhaskar@worldbank.org).
3
Introduction Global experience India
China ......................................... 6
Market evolution ........................... 7
Target market ................................ 8
Business models ............................ 9
Financing instruments ................. 10
Key challenges ............................. 11
US ............................................ 12
Market evolution ......................... 12
Target market .............................. 13
Business models .......................... 13
Financing instruments ................. 15
Key challenges ............................. 16
Germany .................................. 17
Market evolution ......................... 18
Target market .............................. 20
Business models .......................... 24
Financing instruments ................ 23
Key challenges ............................. 23
Table of contents
Market evolution ...................... 25
Target market ........................... 29
Key stakeholders ....................... 31
Key challenges .......................... 32
Business models ........................ 34
Value chain ............................... 40
Financing instruments .............. 44
World Bank-SBI Rooftop
SolarProgramme ........................ 44
ADB-PNB Rooftop
Solar Programme ........................ 47
Role of CTF ............................... 49
Looking ahead Appendix: Stakeholder
consultations – key messages
04
53
06
57
24
PwC4
Introduction
Solar photovoltaics (PV) has witnessed
exponential growth from 2007 to 2017.
During this period, solar PV has evolved
from a niche market of small-scale
applications to a mainstream electricity
source. In the early years, growth was
mainly driven by Japan and Germany
through programmes like feed-in-
tariffs (FiTs) which incentivised wide-
scale adoption of solar PV. Germany
was the largest solar PV market in the
world until 2015, after which China
took over. As Germany scaled back on
its rooftop solar programme, China
and the US became the key drivers
boosted by their respective FiT and
netmeteringprogrammes.
The top ve countries contributing
85% of this global addition, in 2016
and 2017, were China, Japan, the US,
India and United Kingdom. Other
countries like Germany, the Republic
of Korea, Australia, the Philippines
and Chile followed. While China has
been dominating the market, both in
terms of manufacturing and installed
capacity, other emerging markets are
also beginning to contribute signicantly
to the global growth. In 2016 and 2017,
77 GW and 78 GW solar projects were
installed globally respectively, with
China alone accounting for around
46%of this capacity, followed by the US,
Japan and India.
1
0
50
100
150
200
250
300
350
400
450
2011 2012 2013 2014 2015 2016 2017
Capacity (in GW)
Cumulative Solar PV Capacity: Global
70
99
137
177
228
303
381
Rest of World, 15%
China, 46%
US, 20%
Germany, 2.0%
India, 5.5%
Japan, 11.5%
Share of solar PV capacity globally in 2016
Source: REN21 Global Status Report 2017
1 IHS Markit
Global Solar PV capacity
5
While signicant capacity has been
added in utility scale solar projects,
rooftop solar projects have also grown
tremendously during this period,
powered by various government
programmes such as FiTs (as in Germany
and China) and net metering (as in the
US). In addition, scal incentives such
as subsidies and tax credits have also
helped the rooftop solar industry to grow
exponentially throughout the world.
Innovative nancing mechanisms such
as third-party nancing (leasing, power
purchase agreement), especially in the
residential market, have also contributed
to the sector growth, particularly where
the high initial cost of PV systems was a
major barrier to growth.
Rooftop solar PV has experienced
annual growth in most countries, except
in countries like Germany, where the
market became saturated and hence
started to fall. However, the overall
growth of rooftop solar across the globe
saw an annual increase in capacity
and is expected to rise further, thereby
improving the ratio of rooftop solar over
large utility scale solar in the global solar
PV mix. Market forces, including price
decline and change in nancial incentive
and emerging business models, are
expected to contribute to this perceived
growth. While China and the US are
expected to occupy top positions, India is
also expected to become a major market
in the next few years.
India has achieved tremendous growth
in terms of installed PV capacity,
primarily in utility scale installations
during 2010 to 2017 through the
National Solar Mission (NSM), which
aims to achieve 100 GW solar PV
installed capacity by 2022. Under this
mission, India has set an ambitious
target of 40 GW rooftop solar capacity
by 2022, which offers signicant growth
potential for the Indian rooftop solar
market. While the growth in the utility
scale solar market has been spectacular,
with more than 21 GW installed in a
period of seven years, rooftop solar
growth has not been as impressive, with
around 1,219 MW installed capacity
achieved as of June 2018 as per ofcial
gures released by the Ministry of New
and Renewable Energy (MNRE).
2
The benets associated with rooftop/
distributed solar PV systems are
multi-fold. For a developer, it includes
reduced land and interconnection
costs and increased protability due
to higher savings contributed by
increasing commercial and industrial
tariffs. Rooftop Solar PV also supports
distribution companies (DISCOM)
by reducing the peak demand during
the daytime for most countries and
decreases transmission and distribution
(T&D) losses as the power is consumed
at the point of generation. Further, huge
commercial benets are envisaged by
reducing investments in the transmission
system in the host country with these
rooftop systems. Above all, rooftop solar
PV reduces the dependence on grid
power and diesel generators and, at the
same time, offers a long-term reliable
source of power for end consumers.
Despite all the underlying benets,
rooftop solar in India has not achieved
signicant growth. Various international
credit lines and concessional funding
have also been extended to nancial
institutions and banks in India to support
the large-scale deployment of solar
rooftop in the country. Such sources
have supported the market growth in
recent years by reducing the high cost of
nancing for smaller projects, thereby
reducing the tariffs and making the
projects more viable. However, there still
exist many challenges in this segment,
such as awareness building, lack of
capacity, legal and contractual issues,
and roof right issues, which need to be
addressed at each stakeholder level to
help further scale up the deployment.
Currently, India is in the market
transformation phase and hence, the
need of the hour is to address the
issues and challenges hampering this
growth. Other developed countries like
Germany, China and the US have faced
these barriers in the early growth years.
Hence, with this study, PwC aims to
analyse the rooftop market scenario in
developed countries like China, the US
and Germany, followed by a detailed
analysis of the Indian rooftop solar
segment, identifying the challenges
and the role of the Clean Technology
Fund (CTF) in addressing some of these
challenges through concessional funding
support. The study also provides a way
forward for the need for concessional
funding support in the Indian market to
support the large-scale deployment of
rooftop solar PV along the lines of the
growth seen in the utility solar market.
0%
20%
40%
60%
80%
100%
2011 2012 2013 2014 2015 2016
Grid-connected centralised Grid-connected de-centralised Off-Grid
38
79
169
337
624
0
100
200
300
400
500
600
700
0
2
4
6
8
10
12
2011 2012 2013 2014 2015 2016
Installed Capacity (MW)
Installed Capacity (GW)
China US Germany India
2 https://www.mnre.gov.in/physical-progress-achievements
Solar PV technology-wise split
Distributed generation (rooftop) installed capacity
Source: REN21 Global Status Report 2017
Source: Compiled from various sources, PwC analysis
PwC6
Global experience
China
The development of a distributed energy system is one of the most important
measures to promote energy production and innovation of energy utilisation
patterns of a particular country. India, being at the development stage, there is
a need to analyse the experience from international markets such as China, the
US and Germany to understand the trends and business models followed to gain
thescaleachieved.
China’s solar market has grown
tremendously from less than 1 GW in
2010 to 130 GW in 2017, with a growth
of around 67% from the previous year.
Rooftop solar installations have reached
to around 28 GW as on 2017 and are
expected to almost double in 2018.
The country added around 53 GW
of solar PV installations in 2017 as
compared to 34.5 GW addition in
2016.
3
Out of 53 GW installed in
2017, 19.44 GW was achieved through
distributed solar PV projects. Rooftop
installations grew by almost three times
in 2017, comprising 2GW residential
solarPVprojects.
15.89
24.86
42.18
77.42
130
0.8
2.85
4.24
8.48
27.92
0
20
40
60
80
100
120
140
2013 2014 2015 2016 2017
Installed capacity (GW)
Cumulative solar capacity (GW)
Overall Solar Rooftop Solar
The major reasons behind this
tremendous growth in rooftop
solarprojects are:
• Policy support: The government’s
plan to phase out subsidies by
2020, which led investors to grab
the business opportunity with the
available high subsidy
• Market deregulation: Distributed
generators’ model to sell directly
to neighbouring industrial and
commercial customers
• Demand: Availability of multiple
customers and low cost of rooftop
solar compared to industrial and
commercial customers’ retail
powerprices
China has already over-exceeded its
target of 105 GW (targeted for 2020)
by 24% and thus represents around
one-third of the total installed PV
capacityglobally.
3. https://mercomindia.com/china-2017-solar-report/
Cumulative solar capacity (GW)
7
The Government of China is aiming to install the solar PV capacity equivalent to
conventional power. For this purpose, various subsidy schemes from the Central and
provincial governments, depending on the cost of land, labour, nancing, etc., have
been introduced over the years as the Chinese market shifted from provision of an
investment subsidy to FiT from 2009 to 2017.
2008
Shandong Province announced the
implementation of the One Million
Rooftops Sunshine Plan in January
2008. The programme was designed
to encourage the integration of
solar and geothermal power sources
into building construction. This
regulation was implemented in
citiesofYantaiandJinan.
2009
The government initiated the
Integrated Solar PV Programme
that provided upfront subsidies for
grid-connected rooftop and building
integrated Solar PV (BIPV) systems.
The government determined a capital
premium for systems with minimum
peak capacity of 50kW. However, the
subsidy levels declined from 15 CNY/W
(2.35 USD/W)in 2009 to 7 CNY/W
(1.1USD/W) in 2012.
2010
The process of implementation of
national FiT for solar PV generated
electricity came into the picture in 2010
when National Development and Reform
Commission (NDRC) set up a special
interim FiT of 1.15 CNY/kWh (0.17
USD/kWh) for four PV power plants in
Ningxia province.
2012
In October, the State Grid Cooperation
for China (SGCC) announced Interim
Measure of Distributed Solar Power
Generation, to allow grid connection
to small-scale distributed solar power
generators with less than 6 MW installed
capacity and lower than 10,000kV.
The charges for grid connection
werewaivedoff.
2013
In order to develop solar power
generation, between 2013–2015,
theGovernment of China proposed to
refund50% Value added Tax (VAT)
onself-usedsolar power.
2013
The National Development and Reform
Commission (NDRC) announced an FiT
by setting the benchmark on grid power
tariff at 0.9 RMB/kWh, 0.95 RMB/kWh
and 1 RMB/kWh depending on resources
and construction costs in different zones
across China. It was forecasted that the
FiTs would fall by at least 10% each year
on projects smaller than 20 GW and by
20% each year on projects larger than
20 GW. The reason behind such a fall
in tariffs was to promote technological
development and improve efciency. The
FITs in 2017 were around 0.65 RMB/
kWh, 0.75 RMB/kWh and 0.85 RMB/
kWh compared to 0.8 RMB/kWh, 0.88
RMB/kWh and 0.98 RMB/kWh in 2016.
2017
China’s NDRC released FiTs for solar
PV projects to be implemented from
January 2018. The FiT for distributed
projects were decided at 0.37 RMB/
kWh (5.8 US cents/kWh) with 11%
reductionannually.
2008 20112010 2013 20162009 2012 20152014 2017
One million rooftops
sunshine plan
Interim FiTs introduced NEA adjusted the
policy of subsidy
Building integrate
Solar PV programme
Boost in investments and government initiatives
FiT introduction
& subsidy of
0.42 Yuan/kWh
50% refund on VAT
Distributed
energy
participated
in market
trading
Market evolution
Market evolution in China
PwC8
The solar market in China comprises a
utility scale market, dominant in western
China, and distributed solar market,
which is shifting to the central and
eastern regions because of the increasing
load centre in eastern China. Out of the
total installed capacity, 69% comes from
the eastern region, followed by 14%
from south central, 7% from the north,
6% from the northwest, 3% from the
northeast and 1% from the southwest.
Power generation is increasing in the
central and eastern regions, while the
provinces leading the installed capacity
are Zhejiang, Shandong, Jiangsu,
Anhui and Jiangxi. With the increase in
installed capacity of renewable sources
in western China, further capacity
addition of wind and solar is increasingly
becoming a signicant issue. Since there
were issues with transmission and rising
curtailment practices in the western part
of China, the investment started owing
in closer to the load centre in the east.
Development plan Requirement Target
11th Five Year Plan on Energy
(2006–2010)
Distributed energy technology was outlined as one of the cutting-edge
technologies and strategic areas.
–
12th Five Year Plan on Energy
(2011–2015)
Develop distributed energy actively on the principle of electricity
generation mainly for self-use with surplus sold to grid and achieve
coordinated development of centralised and distributed energy.
Apart from other distributed energy
project, focus was on 10 GW
distributed solar capacity by 2015
13th Five Year Plan on Solar
Energy (2016–2020)
Promote distributed solar power in central and east regions, giving priority
to the development of distributed solar power, especially those connected
to the low-voltage distribution network and consumed nearby.
Distributed solar to reach 60 GW
by 2020
340
250
230
220
90
70
60
50
45
40
0
50
100
150
200
250
300
350
400
Shandong Jiangsu
Anhui Jiangxi Henan Jinan Hubei Shanghai Hunan
Zhejiang
East , 69%
North, 7%
Southwest, 1%
South Central, 14%
North East, 3%
Northwest, 6%
Target market
China’s Five Year Plans
Geographical distribution of PV projects in China
Provincial distribution of rooftop solar projects
The top 10 provinces of China with distributed solar PV capacity (as of June 2017)
are represented below.
9
The revenue models of solar PV
projectsare:
All online model
In this model, the owner gets the PV FiT
(xed for 20 years) of 0.65 CYN/kWh,
0.75 CNY/kWh and 0.85 CNY/kWh in
addition to the local subsidy (if any).
This model is used mainly for utility
scaleprojects.
Revenue = FiT + local subsidy (if any)
Extra online model
This model is popular for distributed
solar PV projects. The power generated
can be either utilised for personal use or
sent to grid.
Host-owned model: This model is
the simplest business model in which
the owner installs the project on their
rooftop, consumes the power generated
and sells the excess power to the grid
utility. The reason for maximum success
in this model is that the owner saves
on the electricity bill and additionally
gets the subsidy. If the power generated
is utilised for personal consumption,
no revenue is generated; however, the
owner will be eligible for a subsidy of
0.37 CNY/kWh along with local subsidy
(if any) in addition to savings on the
retail electricity bill.
Self-use price = Basic price + local subsidy
(if any) + 0.37 CNY/kWh
Energy management service (EMS)
model: This model is similar to the US
third-party ownership model and is
further composed of a lease model and
power purchase agreement (PPA) model.
The PPA model is, however, preferred
over the lease model as the owner
eliminates the need to deal with grid
connection and power sales.
• PPA model: In this model, the EMS
provider owns and installs the solar
panel on the rooftop of the host
customer and the customer in turn
gets solar power supply at a rate that
is 80–90% lower than the market
retail price. The revenue for the
customer is the savings made from the
electricity bill. The sources of revenue
for the EMS provider are the revenue
generated from sale of solar power to
the customer, government subsidy and
sale of excess solar power to the grid.
Revenue at
contract price
Revenue at
market price
Energy
consumption
Sale of excess
solar power
Supplies excess power to grid
Provides financial support
• Provides grid connection
• Transfers subsidy
• Lease model: In this model, the
customer leases the PV system from
the EMS provider and pays monthly
xed payments for a xed duration of
lease until the system is transferred to
the host customer. The revenue for the
host customer, during the lease tenure,
is the saving on the electricity bill, sale
of excess electricity to the grid and
government subsidy.
Business models
Grid utility
Financial
institution
Owner
Financial
institution
Grid utility
EMS provider
Host
customer
Other
customer(s)
Host-owned model
Transfers subsidy
Provides
financial
support
PPA model
Supplies excess
power to grid
•
Provides grid
connection
•
PwC10
A global investment of approximately 333.5 billion USD
4
was made in 2017 for the
development of renewable energy and cutting-edge power technologies, out of
which approximately 168 billion USD was used for development of solar projects.
61.7
88
129.8
182.2
205.2
206.8
276.1
324
290.7
268.6
321.3
360.3
324.6
333.5
0
50
100
150
200
250
300
350
400
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Investment (billion) USD
99.5
56.3
13.8
5.6
27.9
19.7
23.4
132.6
56.9
11
6.2
23.4
14.6
10.3
0
20
40
60
80
100
120
140
China US India Brazil Japan Germany UK
2016 2017
Investment (billion USD)
4 Bloomberg New Energy Finance
China recorded the maximum investment with around 40% of the total global
investment. The reason for the growth of the solar market in China was the increased
installation of solar panels in industrial parks where companies planned to reduce
their energy costs and meet their electricity demand through solar energy.
Financing instruments
Global clean energy investment
Country-wise clean energy investment
11
Commercial
The residential market in the country is
highly fragmented and hence customer
acquisition is quite expensive, especially
considering the small size and high cost
of distributed systems. Additionally,
due to low grid electricity prices, the
customers do not see a huge incentive in
installing rooftop solar systems without
FiT support.
Regulatory/legal
Another major challenge faced by the
country is the ownership structure of
residential complexes. Large cities with
high income households have limited
rooftop solar space for installation and
with multi-family apartment complexes
and rented houses, the ownership
rights become a major hindrance to
deployment. Further, installation in the
country is majorly focused towards the
highly industrialised eastern provinces,
while western and southern provinces
have been lagging behind their targets.
Technical
In the absence of an ofcial industrial
standard for residential PV systems
coupled with low level of technical
awareness and low price expectations
of customers, equipment quality tends
to be a challenge during project design
andinstallation.
However, despite the above challenges,
China has been able to achieve one of
the largest rooftop capacity additions
across the globe and the lessons from its
experience could be quite relevant for
the Indian market.
Currently, corporate collateralised loans
are the most common form of nancing
solar and wind projects in China. Apart
from this, in order to meet the solar
targets and provide low-cost, yield cos,
leasing, and crowd and community
funding are promising nancing models.
The various modes of nancing
prevalent in the market include:
Conventional bank loans: The loans
provided by the China Development
Bank (CDB) and/or other commercial
banks are the main source of nance for
the rooftop solar sector in China. The
loans are provided for a short term (1–5
years) based on a borrower’s credit risk.
Loan nancing platforms: Initially,
there were some constraints on bank
loans for distributed solar PV (DSPV)
projects, particularly for non-state-
owned enterprises. The National Energy
Administration (NEA) and the CDB
jointly established a local nancing
platform where the CDB provided a line
of credit to medium- and small-sized
companies who do not get bank loans
Deliver and install
Select PV product
Lease
contract
PV product
sales contract
Lease
rent
Key challenges
Lease finance
company
PV
manufacturer
Other
customer(s)
Lease financing
due to low credit rating. The government
proposed a bank loan for a period of
ve years at a lower interest rate for the
rural, residential and agricultural sector
to promote deployment.
Lease nancing: In this type of
nancing arrangement, the project
developer selects the PV product, the
nancing company purchases the
required PV product and leases it out to
project developer.
Some of the challenges faced by the country can be grouped under the
followingcategories:
PwC12
Market evolution
US
The US installed around 4.5 GW of solar
PV during the rst half of 2017, reaching
a cumulative capacity of 45.4 GW.
5
Growth of solar installations has been
mainly because of falling solar PV prices.
It can be observed that solar PV pricing
has fallen from 8 USD/Wp in 2005 to
much lower (see Figure 15).
The system installation costs in the
residential sector are the highest due to
the small size of installations, complex
supply chain logistics, taxes, overhead
costs as well as margins. On the other
hand, utility installations, larger in
size, have lower costs as compared to
rooftopprojects.
1996
California’s Net Metering law was
announced in 1996 and was applicable
to all utilities except Los Angeles
Department of Water and Power
(LADWP). Under this law, net excess
generation (NEG) from the rooftop
system is carried forward to the
customer’s next bill. Under this law,
any NEG remaining at the end of each
12-month period was granted to the
customer’s utility. Customers had an
option of rolling over any remaining NEG
from month-to-month indenitely, or
they could receive nancial compensation
from their utility for the remaining NEG.
In addition, customers also beneted
from the Renewable Energy Credits
(RECs) associated with the electricity
produced and used on-site.
2002
The California Renewables Portfolio
Standard, 2002, requires its large
utilities to buy 20% of supplies from
renewables by 2017.
2007
Solar California Initiative (CSI) or
Self-Generation Incentive Program
(SGIP) planned a capacity addition
of around 3000 MW in California.
The CSI is a key component of the Go
Solar California campaign. The CSI
programme had a total budget of 2.167
billion USD between 2007 and 2016 and
a goal to install approximately 1,940
MW of new solar generation capacity.
The initiative paid customers either all
at once for smaller systems or over the
course of ve years for larger systems.
2008
The California Public Utilities
Commission announced an FiT
programme in 2008, authorizing the
purchase of 480 MW of renewable
generating capacity from renewable
facilities smaller than 1.5 MW. These
FiTs provided a simple mechanism for
small renewable generators to sell power
to the utility at predetermined terms
and conditions, without engaging in
contractnegotiations.
2011
The US Department of Energy (DOE)
launched the SunShot Initiative with
the goal of making solar energy fully cost
competitive with traditional energy sources
before the end of the decade. Through
SunShot, the DOE supports efforts by
private companies, universities, and
national laboratories to drive down the cost
of solar electricity to 0.06 USD/kWh by
2020, making solar energy affordable.
2012
The New York Sun (NY-Sun) Initiative was
launched in 2012 to increase solar electric
installations in the state. In April 2014, a
commitment of nearly 1 billion USD was
made to NY-Sun for expanding deployment
of solar capacity throughout the state and
transform New York’s solar industry into
a sustainable, subsidy-free sector. NY-Sun
is also expanding the use of solar through
New York State. As of March 2016, a total
of 568 MW of solar electric had been
installed across the state, with New York
State Energy Research and Development
Authority (NYSERDA) funding, powering
more than 94,000 homes. The substantial
growth is attributed to a decline in solar
electric component prices and growth in the
number of installer businesses marketing
solar electric to customers.
Some of the major incentives/programmes to promote
solar PV in the US are represented below:
1996 20072002 2011 20162000 2008 20152012
Net Metering RPS – 20% by 2010 Feed-in-Tariff SunShot
Initiative
Updated RPS –
50% by 2030
Interconnection
Standard
California Solar
Initiative
New York Sun
Initiative
Net Metering
2.0
3.70
2.54
1.38
3.51
2.26
1.30
0.00
0.50
1.00
1.50
2.00
2.50
3.00
3.50
4.00
Residential Non-residential Utility scale
Average Solar PV Pricing ($/Wp)
2016 2017
5 https://www.nrel.gov/docs/fy18osti/70406.pdf
Average solar PV pricing
13
In 2016, the US witnessed a record 2.6 GW
of residential distributed solar systems.
Residential customers have been the major
drivers of distributed solar generation in
the country. The deployment had been the
fastest in the states where net metering
had been quite active.
The residential market boomed at around
70% growth in 2015, which slowed down
to 23% growth in 2016, on account of
both seasonal factors and the inevitable
Until 2006, the US solar market was
mainly driven by utility scale projects;
however, by 2015, the residential solar
PV grew to capture about one-third of the
total installed capacity in the country. The
major contributors to growth included the
fall in hardware costs, including the panel
and inverter cost decline by over 60% on
a per watt basis since 2010.
Considering the solar system cost on a
per watt basis, the average residential
solar prices ranged at around 3.70 USD
during 2014–2015. Approximately two-
thirds of this per watt cost includes the
cost of installation, while the remaining
one-third constitutes sales as well as
general and administrative costs. Given
the average household income of 53,657
USD of Americans in 2014, rooftop solar
systems fell beyond the reach of most
people. Hence, a model similar to the
one in the auto market was considered.
The residential solar providers created
third-party owned nancing models to
attract customers. With ‘no money down’
contracts and low initial rates, households
faced fewer barriers to accessing what
companies believe to be residential
solar’s long-term value proposition.
They became providers of ‘solar-as-a-
levelling-off of demand. The major reason
for the slowdown, despite stable policies
and solar reaching almost grid parity,
was the customer acquisition challenges
faced by solar providers. Another factor
affecting the overall slowdown in the solar
installations was the addition of taxes on
the imported solar cells and modules that
affected bulk procurement and hence
increased the project cost.
The non-residential market, on the other
hand, remained at over the past couple
of years until 2016. The major contributor
to the sudden growth observed in 2016
was the new state-level policies which
included the extension of the net metering
programme capacity limits. The growth
in the distributed solar market for both
residential and non-residential customers
is represented below:
service’: selling, installing, nancing
and maintaining the solar system for
customers. The new residential solar
business model inuenced households
as well. Solar leasing and loan products
allowed a higher number of Americans
to become ‘prosumers’ of electricity—
producing, consuming, and reselling
electricity to the grid.
Four primary nancial contracts were
used:
1. Loans
Under this model, the solar provider
(engineering procurement construction
[EPC] contractor) grants a loan to
homeowners, thus allowing them to
purchase the solar system and make
interest payments to the EPC contractor
until the loan maturity tenure. The
debt product can, however, involve an
annualescalator.
2. Property Assessed Clean
Energy(PACE)
PACE nance is similar to the home equity
loan wherein PACE customers receive
solar installations, while municipalities
structure municipal bonds to repay the
capex on the installations, so that the
customers are not burdened with upfront
cash payments. PACE households then
repay the bonds, which are secured by
the home, via annual tax assessments
over approximately 15 years. Unlike other
forms of nancing, PACE has one major
constraint: it is limited to municipalities
with programmes in place.
3. Lease
Under this model, the EPC contractor
enters into a standard 20-year lease
agreement with the customer and, in
turn, provides the solar panels and
complete system. The household thus
agrees to a xed USD/kWh payment
which is less than the previous utility bill.
The differential in the utility bill using
solar and without solar makes the value
proposition for the household with the
added incentive of no upfront payment.
4. PPA
This model is quite similar to the leasing
model with the difference that PPA
holders enter into a contract to buy the
solar system’s power at a predetermined
USD/kWh rate.
246
304
494
792
1231
2099
2583
2227
372
800
1043
1112
1036
1011
1586
1273
0
500
1000
1500
2000
2500
3000
2010 2011 2012 2013 2014 2015 2016 2017
Installed capacity (MW)
US distributed solar installations
Residential Non-Residential
Target market
Business models
US distributed solar installations
PwC14
In the lease model, three primary
incentives and cash ows are:
• Lease payments from household
(rooftop system beneciary) to the
solar installer/provider,
• State credits for the electricity
produced, and
• Federal government tax credits (ITC
and MACRs) and investors in them:
- Investment tax credit (ITC): ITC
involves a 30% reduction in the income
tax payable by the individual or rm
seeking the credit until 2019 and then a
gradual step down to 10% by 2023.
- Modied accelerated cost recovery
system (MACRS): It is a form of federal
subsidy allowing the companies to
depreciate rooftop solar assets over ve
years and deduct up to 85% of the cost.
Based on system ownership, the three
types of business models prevalent are:
• Host-owned model: This is the
most common ownership model
followed for rooftop solar projects.
In this model, the rooftop solar
system is owned by the roof owner
and the electricity produced from
the system is mainly used by the
owner, and the excess electricity
produced is sent back to the grid for
which the owner receives the credit.
This model, however, has certain
disadvantages, including high upfront
and maintenance cost, risk of poor
performance depending on the
quality used by the EPC contractor
and transaction cost associated
withgridinterconnection.
Monthly lease payment with annual
escalation for average 20-year lease term
Value proposition
(solar+ utility bill < standard utility bill)
No upfront cost
Monthly O&M
• Investment tax credit (ITC)
• Modified accelerated cost
Recovery system (MACRS)
• Net energy metering (NEM)
credits and regulations
State subsidies (e.g. Solar
Renewable Energy Credits
[SRECs])
Installation fee Build project
Tax incentives/electricity
Prevailing electricity rates
Excess electricity units
through net metering
Thus, to overcome this disadvantage of
huge upfront capital investment by the
customer and ownership for the operation
and maintenance of the system, various
other business models are preferred for
residential distributed solar.
• Third-party ownership: In this
model, a third party owns the system
on the customer premises/roof and
offers the benets of solar generation
to the customer through a 10–25 year
lease or PPA arrangement. In this PPA
arrangement, the customer agrees
to pay a xed per unit charge for the
electricity used. Hence, the amount
paid varies monthly as a function of
power generation. The main advantage
of this system is that the third party
can pool in multiple projects (PPAs/
leases) to attract a larger project
portfolio and offer competitive returns.
This model has been quite prevalent
in the US market as the solar leases
and PPAs available have favourable
interconnection and net metering
policies; legal and regulatory clarity
for third-party solar ownership models
and local nancial incentives have also
favoured growth in the US.
• Community ownership: In this model,
multiple customers own a single rooftop
PV system and share the benets of
solar generation. This model helps
multiple consumers gain the benet of
PV installation, especially customers
who face challenges of roof ownership
rights (e.g. tenants) or customers with
high rise buildings (roofownership
access/building constraints of
shadowfree area).
US government
and IRS
Tax equity
investors
Solar
provider (EPC
contractor)
Solar rooftop
system
Electricity
meter
Investor-
owned utility
and distribution
grid
Public Utilities
Commission
and state
government
Utility
System/roof
owner
Rooftop
project
(distributed
solar)
EPC
contractor/
installer
Typical business model for US solar residential systems – lease/PPA
Host-owned model
15
The initial cost of a solar PV system
acts as a barrier for deployment. In
order to overcome this barrier, the
following nancing mechanisms are
practicedinthe US.
Financing through
government/utilities
The government and utilities can play a
signicant role in the advancement of
rooftop solar PV. Quite a few municipalities
in the US have initiated programmes to
allow for affordability of rooftop PV projects
through provision of nancial incentives
such as low interest loans, rebates, subsidies
or the creation of alternative ownership
structures like shareholding structures
in solar farms. Some of these initiatives
areoutlined below:
PACE programmes
As mentioned earlier, PACE acts as a
municipal nancing mechanism through
which property owners receive 100%
nancing in the form of loans for their
renewable energy projects through the
municipality. This loan is repaid through
property tax bills. Municipalities collect
this funding from local people through
the issuance of green bonds.
Municipal bond-PPA model (the
Morris model)
As per this model, bonds with low
interest rates are issued by the
government in order to raise funds.
The proceeds are then handed over to
a project developer in exchange for an
attractive lease purchase agreement. The
developer can then sell the electricity
through a PPA to the DISCOM.
Third-party ownership model
The developer nances, owns and
operates the cost of the rooftop under
two main categories:
Solar leasing model
The building owner pays monthly
instalments to the third-party rooftop
owner (‘developer’) as he leases the
system through a long-term contract,
while the cost of the system is borne
by the developer. The building owner
consumes electricity at a price that
is at times lower than what he would
pay to the utility. This model has been
predominant in the development of
theUS solar market.
Solar power purchase model (PPA):
In this model, the consumers buy
generated electricity from a third-party
developer through a price decided
in the contract per kWh, typically for
10–20 years. The developer installs,
owns and operates the system. Any
excess electricity can be sold to the
utility. This results in the reduction or
elimination of the upfront cost of the
system, allowing those with less income
to affordrooftopsystems.
Utility-sponsored model
In this model, the utilities nd a
source of nance on behalf of their
customersthrough:
On bill nancing:
This is an instrument through which
renewable energy projects are paid for
by utility customers on their monthly
electricity bills. Utilities take advantage
of the fact that they can obtain lower
interest loans than consumers, and in
turn make available the nance they
have obtained through to commercial,
residential and community projects in
the form of a loan. This loan is in turn
repaid to the utility as a line item on the
monthly electricity bill.
Utility-owned distributed solar:
The utility installs, owns and operates
the rooftop systems. These systems can
be installed on leased commercial and
public properties within the utility’s
service territory. This model saves
on the transaction cost of payments
throughutility bills.
Volume purchasing
Rooftop owners interested in solar
panels can get together in educational
workshops as a group and the high
upfront costs can be overcome through
bulk purchase of systems. This model
also decreases cost when combined with
government incentives. Also, system
owners can offer discounts as they
saveon marketing costs.
Installation and O&M Electricity supply
Lease/PPA payments
Prevailing electricity rates
Excess electricity units
through net metering
Financing instruments
Lender 1
Project
portfolio
Lender 2 Utility
Special
purpose
vehicle
Beneficiary/
host
Third-party ownership model
PwC16
Some of the challenges faced by the
country during its growth phase were:
Lack of state support
In a federal system like the US, states
hold the power to regulate renewable
energy growth. The lack of mandatory
RPSs in several states with a large
rooftop PV potential has impeded the
growth of the industry.
Third-party arrangements
Several states have specied that third-
party arrangements are not considered
as utilities by their state regulatory
agencies and are therefore not subject
to regulation. Most net metering rules
did not address this issue, which led to
the creation of contracting ambiguities.
Further, third-party ownership is not
allowed in several states, thus creating
barriers to leasing models.
Inuence of traditional
energysources
The coal industry and power utilities,
whose revenues were threatened by
captive solar power, are formidable and
had a signicant inuence in slowing
down the growth of distributed solar.
Ownership of RECs
RECs are the environmental (nonpower)
attributes of renewable generation.
RECs allow these attributes to be
unbundled or sold separately from the
associated energy commodity. REC
ownership has emerged as a critical
policy and economic issue for distributed
generation system owners, utilities
and regulators, especially in the wake
of the widespread state adoption of
RPSsinrecent years.
Soft costs
Activities such as permitting, nancing
and customer acquisition drive up ‘soft
costs’ to the point where non-hardware
costs make up an unreasonable portion
of total costs in the US, especially for
rooftop systems. The DOE reported
that soft costs make up more than half
the price of installed solar power, with
residential solar bearing the largest
burden of these expenses. The soft costs
associated with customer acquisition are
higher than those of large-scale projects
due to the distributed nature and
smallsize of the projects.
Real estate barriers
Almost one-third of all American houses
are rented, and an average family shifts
its home 11 times, which becomes
a challenge in justifying the 25-year
investment in solar PV. Rented homes
and multiple tenant homes have little
incentive to adopt rooftop solar projects.
Outdated regulations
Several states follow outdated grid codes
and regulations which were drafted
when there were no safe provisions to
feed power safely back to the grid. In the
absence of RPSs, these regulations are
interpreted arbitrarily by utilities with
an inherent conict of interest due to the
loss of revenue from the distributed solar
projects. Often, this leads to rejection,
lengthy delays and arbitrary high costs
for applications by investors.
Other considerations
Many districts and states have historical
preservation guidelines which require
many neighbourhoods to install
solar panels in ways that cannot be
seen from streets. This reduces the
availableroofspace.
However, these challenges were
managed by the country to
reach GW scale installation in
distributedgeneration.
The US solar market which grew by a
record high level of around 15 GW in
2016, fell to around 10 GW in 2017 and
is further expected to remain stagnant
with the major contribution from the
increased (30%) tax on imported solar
panels. The impact of this move is
expected to be seen during the period
2018–22. The forecasts conducted
estimate a dip of 13% in the overall solar
deployment in the country. Although
the major impact of increased duties
on imported modules is expected to
be on large-scale utility installations,
residential and non-residential
deployment shall also be affected
bythisincreased system cost.
Key challenges
17
Germany
Over the past 10 years, Germany’s
renewable energy sector has grown more
than threefold and the country is now
an undisputable leader in renewables in
Europe and globally. The current energy
mix comprises around 50% of renewable
energy capacity, with small-scale PV
at this time representing around 15%
and expected to grow further due to
thedecrease in solar prices.
In 2010, legislative support was passed
that aimed to lower greenhouse gas
(GHG) emissions to 80–95% by 2050
(relative to 1990). To achieve this, the
Energiewende (the transitional move
by Germany towards low-carbon,
reliable, affordable and environmentally
sound energy supply) programme was
started for complete elimination of
electricity generation through nuclear
and petroleum fuels. The targets
were established to switch to 35%
renewable energy by 2020, 40% by
2025and60%by 2050.
Solar power in Germany consists
mainly of PV and constituted 7% of the
net electricity generated in December
2017. The country is one of the largest
generators of solar PV power in the
world, with around 43.4 GW installed
capacity as on April 2018. Renewable
energy accounted for 39% of net
electricity consumption in 2017. A study
shows that on sunny weekdays, PV power
in the country can cover 35% of the
short-term electricity demand that can
rise to 50% on weekends and holidays.
Germany’s solar power growth curve has been quite volatile. Solar PV growth
accelerated in 2010 until 2012, mainly due to a rapid fall in solar PV module
prices. The annual installed capacity reached a record high of 7.6 GW in 2012, but
the growth fell to 1.2 GW in 2014 due to the subsidy degression that signicantly
affected solar growth in the country.
8.6
8.3
10.3
11.1
12.4
15.4
16.1
18.3
19
23.2
25.9
27.3
29.5
33.4
33.6
38.2
41.9
0
0.1 0.1
0.2
0.4
0.6
0.8
1.3
2.2
3.8
4.9
5.7
6.7
7
6.9
7
5.6
0
5
10
15
20
25
30
35
40
45
Renewable Energy Share %
Renewable Solar Share
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
May-18
0.7
1.0
0.8
1.3
2.0
4.5
7.4
7.4
7.6
3.7
1.2
1.3
1.5
2.3
0.4
1.1
2.1
2.9
4.2
6.1
10.6
18.0
25.4
33.0
36.7
37.9
39.2
40.7
43.0
43.4
0.0
5.0
10.0
15.0
20.0
25.0
30.0
35.0
40.0
45.0
50.0
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Apr-18
Solar PV Capacity (GW)
Annual Cumulative
Annual share of solar and renewable energy
Solar installed capacity
PwC18
1991
The Electricity Feed-in Law
(Stromeinseisungsgesetz [StrEG])
introduced the rst FiT in Germany.
However, the initial FiT rates xed
were 90% of the retail electricity rates
(~8.45–8.84 EUR cent/kWh). This
rate was not low enough to attract
huge deployment; however, additional
incentives in terms of rebates equal to
70% of system cost and low-interest
nancing attracted modest market
growth during the decade. Hence, by the
end of 1999, 67 MW of PV was installed.
In 1991, the Electricity Feed-in Law
ensured grid access to the electricity
generated through renewable energy.
It also obliged utilities operating in
the public grid to buy the electricity
generated from renewables at higher
FiTs. The entire burden was borne by the
electricity supplier and its customers.
Solar and wind power plants received
the highest remuneration, followed by
small hydro power, biomass and biogas
plants. In 1996, due to liberalisation
of power markets and phasing out of
cold levy, the premium prices stared to
decline. Since, the law had put a burden
on utilities, the law was amended in
1998 by introducing a ‘double cap’,
thus limiting the amount of renewable
energy. Regional and preliminary
electricity suppliers were thus bound to
purchase maximum of 5% of renewable
energy of their total energy supply, thus
leading to a cap of total 10%.
1991-95
The 1,000 Roofs Programme supported
the installation or extension of
PV systems larger than 1 kW. The
programme offered reasonable project
nancing terms like loans with an
interest rate of 4.5% below market
conditions, repayment period of 10 years
and two years of deferred payments. The
projects were nanced up to 100% of the
cost with a maximum limit of 5,00,000
EUR. For installations smaller than 5 kW,
the loans were limited to 6,750 EUR/kW
and for installations larger than 5 kW,
the loans were limited to 3,375 EUR/kW.
1999–2003
The 100,000 Roofs Programme was
launched in 1999, as an extension of
the 1,000 Roofs Programme and aimed
to stimulate the installation of 100,000
grid-connected PV systems totalling
to 300 MWp within six years. The
programme supported the installation of
PV systems larger than 1 kW and for this,
loans were offered at an interest rate
of 4.5% with a repayment period of 10
years and 2 years of deferred payments.
The programme was launched with
various incentives, some of which were
reduced interest rate of up to 0% for
PV systems, waiver of last instalment of
up to 12.5%of the investment, etc. The
programme corresponded to a subsidy of
around 35% of the project cost.
While the programme stimulated the
market in 1999, only 8.9 MWp (~3,522
PV systems) was nanced as compared
to the planned capacity addition of
18MWp. It was realised that a subsidy
of 35% was not attractive enough
to attract demand and at the same
time, banks showed little interest in
promotingthisprogramme.
2000
A key programme under Energiewende,
the Renewable Energy Sources
Act (EEG) governs the promotion of
renewable energy to achieve its target
of 60% clean energy by 2050. The EEG
was passed as a legislation in 2009 and
has subsequently undergone multiple
revisions in 2012, 2014 and 2017.
The EEG was a tremendous success
in achieving its goals for renewable
energy penetration in the country and
stipulated FiTs that provided clarity to
investors and at the same time provided
a mechanism to apportion costs to
electricity users, in order to ensure
stability in payment mechanisms.
1991 20001999-2003 2008-2009 2013 2014 20171991-95 2004 20122010
Electricity Feed-In
law- StrEG
100,000 Roofs
Programme
First Country (along
with Japan) to reach 1
GW installed capacity
SunShot
Initiative
New installations started
declining due to stricter
government policies
1,000 Roofs
Programme- Grant
EEG-Renewable Energy
Source Act- FiT
Amendments and Revisions of EEG
Amendments and
Revisions of EEG
New York Sun
Initiative
Market evolution
Market evolution in Germany
19
Capacity FIT (Eur Cents/KWh)
Up to 30 kW 39.14*
Up to 100 kW 37.23*
Up to 1 MW 35.23*
Provides access to Grid and sets FiT
Renewable
Electricity
Renewable &
Conventional Electricity
Feed in Tariff Electricity rate +
FiT Surcharge
The law introduced national rates
that approximated the generation cost
of PV systems and was found more
effective than the incentive/subsidy
linkages offered. This generation cost
method was benecial as it helped to
set a target internal rate of return (IRR)
which decreased the risk and provided
investors with a high level of certainty. In
Germany, the target IRR proposed was
5–7%. The rst EEG established a rate of
0.99DM/kWh (~0.51 EUR cent/kWh)
for solar PV starting in 2001. With this
law, combined with the 100,000 Roofs
Programme, a cumulative capacity of
~435 MW was installed by 2003.
Thus, the resulting high level of
investment security and lack of red tape
are assumed to be the major reasons for
the success of EEG in bringing down the
cost of renewables. Without the EEG,
renewable energy projects in Germany
would have had to nd a buyer for that
electricity as most utilities would have
rejected the offer due to conict with
the third-party investments in their
existing assets. The EEG thus opened up
the power market to newcomers who
believed they could make solar work.
2003
The EEG rates were revised to 46–62
EUR cents/kWh in 2003 which
accelerated the market growth, with
cumulative capacity expanding to
5,979 MW by the end of 2008 (average
annual capacity addition of ~ 1,100
MW). The revised EEG also supported
the PV market growth by removing
the 1,000-MW programme cap as
well as the cap on system size. This
amendment in EEG thus created the
rst uncapped PV market in the world.
The annual degression was set at 5%
for all systems, except for free-standing
systems which decreased annually at
around6.5%starting in 2006.
2009
The nal amendment in EEG in 2009
removed FiT rates for integrated
PV; however, a ‘self-consumption’
incentivewith a xed tariff 0f 25.01
EURcents/kWh was introduced.
The law is the basis for Germany’s
Energiewende and species two things:
• Priority dispatch for renewable power
• Floor price for electricity generated
from renewable sources
Under the EEG, owners of solar arrays
are guaranteed access to the grid.
The standard contract for FiTs signed
with the utility ranged to an easy-to-
understand two-page document. The
FiTs are guaranteed for 20 years, which
is unusually long for PPAs.
EEG timeline
Renewable Energy Sources Act, 2010
FiT was introduced for rooftop solar and
utility-scale PV projects, leading to an
increase in the solar capacity. The key
features of EEG 2010 are listed below:
• Providing priority access to renewable
energy in the power grid
• Obligation of grid operators to
purchase the electricity produced from
renewable energy
• Fixed price (‘tariff’) for every kilowatt
hour of energy produced from
renewable energy for 20 years
• All different types of renewable
sources are considered and tariffs
aredifferentiated by source and size
oftheplant
• Degression of 10–9% /annum on tariff
• Additional reduction of 5% per month
on FiT, applicable if the installed
capacity exceeds the corridor of
2.5–3.5 GW
Government
Utility
Renewable
Energy
Producer
Electricity
Consumer
EEG model
EEG 2010 rooftop solar FiT
PwC20
Renewable Energy Sources Act, 2012
It preserves the EEG 2010 framework
and adds the option for generators
to sell the power into the wholesale
energy market. It has set a target of
35%renewables by 2020 (already
achieved in 2018).
• Market premium payment:
Encourages direct sale of electricity
in the spotmarket through a market
premium payment.
• Market premium = (FIT – [average
monthly wholesale price –
managementpremium])
• Management premium is the additional
cost for generators to participate in the
whole sale market.
In 2000, the Government of Germany
launched a massive ratepayer-subsidised
campaign aimed at generating affordable
electricity using solar energy. Since
the costs of solar equipment were high
compared to retail electricity prices
at that time, the German government
has set higher FiTs when compared
to the retail electricity price to attract
investment in the solar industry. As
the ow of investments for solar PV
installations started increasing, the PV
equipment costs started to decrease.
• Larger management premium means
higher market premium.
• Market premium will be zero if
wholesale electricity prices are
highenough.
Renewable Energy Sources Act, 2014
This act requires operators of a new
plant to market their electricity
themselves in return for market premium
from the grid operator to compensate
for the difference between the xed
EEG payment and average spot price
forelectricity.
Renewable Energy Sources Act, 2017
EEG 2017 species a xed expansion
corridor for renewable energy as a
share of gross electricity consumption,
attempting to both support and restrict
the growth in PV capacity.
• For systems above a certain nominal
power (ca. 10 kW), self-consumed PV
energy is subjected to an EEG levy.
• New PV systems up to 100 kWp receive
a xed feed-in tariff.
• New PV systems between 100 and
750 kWp must sell their energy by
directmarketing.
FiT Programme for solar PV projects
The FiT programme for rooftop solar and
utility projects was an important catalyst
for propelling solar market growth in
Germany. The rates where xed under
EEG 2009 and were subsequently
modied under EEG 2012, 2014 and
2017. Under EEG 2017, FiT for projects
above 700 KW was replaced by an
auction-based mechanism as proposed
under EEG 2014.
FiTs were designed by the German
government to meet the pre-planned
capacity addition targets. However,
similar to most of the subsidy schemes,
they were phased out slowly over
time, offering a lower price per kWh.
This led to a signicant fall in FiT
for the residential segment from
49.2EURcents/kWh in 2007 to
12.32EUR cents/kWh in 2017.
Under net metering, which was
introduced through an amendment
to EEG in 2009, customers received
energy credits in their electricity bills,
i.e. the excess electricity generated
from the solar systems was fed back
into the grid and was settled at the
retail electricity rate. However, in 2013,
customers received a reduced FiT rate of
17.02 EUR cents/kWh, while the retail
electricity rate was 25 EUR cents/kWh.
This led to a signicant fall in new solar
installations in the country.
Year Management premium
2012 1.2
2013 1.00
2014 0.85
2015 0.70
• New PV systems over 750 kWp
are required to partake in calls for
tender and may not be used for self-
production. The last licensing round
of the Federal Network Agency in
September 2017 set a mean value of
4.91 EUR cents/kWh.
• Numerous other regulations
exist regarding potential areas
for installations, the capability of
remote power control and power
reduction,among others.
Target market
Management premium cost
21
Digression
6
EEG 2017 has an annual target of
2,500 MW per annum for solar
power. A digression rate of 0.5% may
be considered every month.
7
It can
be increased to 2.8% if the actual
development surpasses the digression
rate. In case the development of solar
power is not able to meet the targets,
then the digression rate is reduced and
in extreme cases, the tariff rate will even
be increased by up to 3%.
Residential sector
The cost of electricity from residential
rooftop solar PV is falling rapidly. In just
over six years, the costs have fallen by
almost 64% in German cities. The cost
levels had also varied for small solar
systems with the capacity of less than
5 kW and for solar systems with the
size range of 5–10 kW. The differential
between the two capacity categories,
increased from 4% in 2010 to around
13% in 2016, thus increasing the
viability of larger systems of 5–10kW
against small-scale solar systems of
less than 5 kW. The trend of average
residential solar system costs over the
period of six years starting from 2010 for
both small and large-scale rooftop solar
system is shown below (Figure 25).
49.2
46.75
43.01
39.14
28.74
24.43
17.02
13.68
12.56
12.31 12.31
0
10
20
30
40
50
60
-
2.00
4.00
6.00
8.00
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
PV Capacity (GW)
PV Capacity (GW) FIT rates (Eur cent/KWh)
FiT rates (Euro cent/kWh)
4.5
3.95
2.7
2.29
2.2
1.8
1.79
4.34
3.66
2.44
2.12
2
1.56
1.55
0
0.5
1
1.5
2
2.5
3
3.5
4
4.5
5
2010 2011 2012 2013 2014 2015 2016
Residential PV cost (USD/W)
Average Residential PV system cost in Germany
upto 5 kW system
5-10 kW system
6 For most technologies, the tariff levels will decrease over regular periods of time. New plants will receive the tariff level applicable on the day they
are put into operation. This tariff level will apply for the entire payment period, i.e. the life of the project. For some technologies, the percentages
by which the tariff levels will decrease are set by law and are not subject to change. For other technologies, the percentage by which the tariff
levels will decrease depends on the amount of newly installed capacity.
7 Section 49, EEG, 2017
FiT trend in Germany
Residential PV system cost in Germany
PwC22
Solar Electricity fed
to metering Device
Electricity
consumed
by tenants
Surplus Electricity
Electricity
consumed
by tenants
Conventional and Renewable
Electricity supplied from Grid
Market premium model or self-
consumption model
The market premium model or self-
consumption model allowed the owners
of rooftop solar PV systems to consume
the electricity generated from their system
directly instead of injecting it into the grid.
Additionally, with the decrease in FiT
rates, the small and large renewable
energy generating companies started
selling their electricity output directly to
the market. In return for the electricity
supplied, the producers got spot prices plus
the market premium instead of FiT rates.
Market premium = FiT – spot market price
Market premium is calculated monthly
as the difference in nominal FiT and
technology-specic volume weighted
average the spot market price in that
month. The solar volume weighted
average price is slightly higher in the
afternoon than the plain average spot
price in the afternoon. In general,
all the producers generating energy
from similar sources receive a price
corresponding to the nominal FiT.
Depending on the individual producer-
specic feed in prole, he will receive
a price that is higher or lower than
thegroup average.
The main objectives of this model are:
• The renewable energy generators
should familiarise themselves with
wholesale market workings in terms of
volume and price forecasting, exchange
trading, etc., so that they can integrate
with conventional generation easily.
• It provides an incentive to control
the dispatching of renewable
energyatpeak loads only.
FiT
The FiT programme for rooftop solar
and utility projects is the most important
catalyst for propelling Germany as one
of the largest solar markets in the world.
The rates were xed by EEG 2009 and
subsequently modied under EEG 2012,
2014 and 2017. Under EEG 2017, FiT
for projects above 700 kW was replaced
by an auction mechanism as proposed
under EEG 2014.
Landlord – tenant electricity supply
In this case, the electricity is generated
by installation of rooftop solar plants on
a residential building and the electricity
generated is passed on to consumers
(tenants) living in the building or
in nearby residential buildings. The
electricity generated is also supplied
to run the ancillary facilities located in
close proximity to this building. Thus,
consumers get electricity from the
rooftop project installed and not through
the public grid. In case there is surplus
electricity, it is fed to the public grid.
By using this model, the tenants will be
exempt from the wide range of charges
such as FiT, electricity tax, surcharge
and fees that they would have to pay if
electricity is purchased from the public
grid. The landlords also receive credit
funding for each unit of electricity supplied
to their tenants; thus, it is a win-win
situation for both landlords and tenants.
To increase the use of this model, the
government proposed to pay a premium
to the landlords for supplying electricity
to their tenants. The premium is set
somewhere between 2.2 US cents/kWh
to 3.8 US cents/kWh and is calculated on
the basis of the size of the solar installation
and the national PV expansion rate. To
ensure that the costs for the new funding
system will be kept low, the volume of
solar electricity that can be added per year
for which landlords can receive a premium
was proposed to be capped at 500 MW.
Business models
Grid
Metering
Device 1
Tenants
Consuming
Rooftop solar
Electricity
Rooftop
Solar Plant
over a
Building
Metering
Device 2
Tenants
within same
building
purchasing
electricity
from Grid
Landlord model
23
Some of the challenges faced by
the country in the deployment of
distributedgeneration are:
• It was a challenge to obtain bank credit
in the case of rooftop systems. To cover
this nancing gap, crowd investing
came up as an alternative instrument
where subordinated loans are used
and no collateral is required. This has
become quite popular in recent years.
• The individual plants were too small
to efciently and directly market
energy. Further, the roll-out faced
inexperience of many small generators
with trading/energy exchange.
For these reasons, independent
power traders had to operate as
intermediaries between generating
companies and the market. Network
operators are required to sell the
electricity fed in by small generators
on the electricity spot market.
• The exemption of residential PV
systems deriving commercial revenue
through FiT from the requirement to
obtain planning permission does not
cover the possible change of use of
non-commercial buildings. PV systems
not registered as a trade and not in
possession of a licence or an exemption
from building authorities thus violate,
in part, both the trade lawand
thebuilding code.
• The FiT scheme, while successful in
creating a huge demand and driving
down prices worldwide, has been
challenged as a drain on public
nance. The levy (reallocation charge)
on conventional power to nance
FiT has led to a surge in power prices
for all households. Poor households
without PV rooftop will be negatively
impacted by the increased power cost.
Exceptions for trade-sensitive and
energy-sensitive industries from FiT
levy imply that the burden was passed
on to ordinary households.
Key mechanisms Players involved Description Financing mechanism
Market premium
surcharge
Plant operator, grid
operator
The plant operator sells his electricity directly, i.e.
to a third party, by a supply agreement or at the
stock market, and claims the so-called market
premium from the grid operator.
Premium surcharge is financed through
a tax and thus is finally borne by the
consumers.
Loans
Multilateral institutions,
retail banks, consumers
More than 50% of new capacities for electricity
production from renewables in Germany are
financed by KfW.
KfW provides refinance loans to retail
banks, who in turn provide loans to
consumers. It banks on the retail banks
to cover any margins for credit risk and
handling issues.
Subsidy
Multilateral institutions,
plant operators
Provided by KfW 30 million EUR in 2017
Leasing of
rooftop system
Utility/or a company Utility or private company invests in plant to be
leased
Bank loan or equity
Crowd investing
Crowdfunding platform,
plant operator
• Investors become shareholders
• In most cases, subordinated loans
(a mezzanine instrument with no
collateral requirement)
• As the grid system in Germany was
already strong, it was able to absorb
a large amount of renewable energy
with minimal modication. However,
large-scale changes will be required
going forward to achieve the goals of
Energiewende. Germany expects to
invest 18 billion EUR over the next 5–8
years to update and expand the grid
infrastructure, both for transmission
lines and distribution grids, as well as
for smart metering and technologies
to support advanced strategies such
as virtual power plants. This will be
funded through grid fees, which all
German utility customers (commercial
and industrial included) pay for on
their utility bill, further increasing
the risks of public pressure to scale
backthe programme.
Thus, the learnings from countries which
have successfully deployed rooftop solar
PV shall be useful in the Indian context
based on the Indian market scenario.
Although the challenges faced by each
country are quite different and specic
to it, some of the challenges on the
regulatory and technical front can be
considered to avoid certain challenges
that India would face with the large-
scale deployment of rooftop solar PV.
Key challenges
Modes of financing
Financing instruments
PwC24
India
India is a growing economy with total
installed power capacity of 343.8
8
GW
(as on June 2018). This installed capacity
is dominated by energy from fossil fuels,
followed by the share from renewable
sources, nuclear, hydro, diesel and gas.
Of the total installed capacity, renewable
energy accounts for 69GW
9
(as of June
2018) which is approximately 20% of
the total installed capacity. The energy
from renewable sources has grown at
a CAGR of 15% from FY14 to FY18,
while the contribution of conventional
energy sources is decreasing at around
4% Y-o-Y. The renewable energy
sector is expected to grow further in
the coming years because of a shift
in the government’s focus to meet
the demand from renewable energy
rather than from conventional energy
sources. Currently, wind is the major
contributor to renewable energy sources;
however, solar is expected to overtake
windby2020.
Power generated from solar projects has
a share of 32% (~23 GW) of the total
renewable energy capacity in India and
the installed capacity has grown from
a mere 10 MW in 2010 to 23,022 MW
in 2018 (as of June 2018). The capacity
addition of rooftop solar has yet not
seen signicant growth, contributing
only around 6% to the total solar energy
mix. However, with the availability of
better project nancing rates and decline
in module/system costs, rooftop solar
is expected to make huge additions in
coming years and thereby achieve the
target of 40GW by 2022.
Coal, 57%
Gas, 7%
Diesel, 0.2%
Nuclear, 2%
Hydro, 13%
Renewables, 20%
Energy Mix, Mar'18
Wind, 49%
Small hydro, 6%
Biomass, 13%
Waste to power, 0.2%
Solar, 31%
Energy Mix, Mar'18
Ground Mount, 95%
Rooftop, 5%
,
Government/public
sector, 16%
Residential, 20%
Industrial, 43%
Commercial, 21%
8 http://www.cea.nic.in/reports/monthly/
installedcapacity/2018/installed_capacity-06.pdf
9 https://www.mnre.gov.in/physical-progress-
achievements
Energy mix
25
The development of rooftop solar projects
in India began with the introduction of
rooftop solar targets in Gujarat in 2009.
Gujarat was one of the rst states in India
to announce a solar policy and develop
2010
In order to promote solar power, the
Jawaharlal Nehru National Solar
Mission (JNNSM) was launched in 2010
by Government of India. The government
set a target of 20 GW solar energy by
2022. The target of this mission was
to create conditions for boosting solar
installation in the country.
Later during the year, Gujarat initiated
the ‘rent-a-roof’ programme. Under
this programme, supported by IFC,
private and government companies
started to lease rooftop space on
residential rooftops and government
buildings. The operators received FiT
of 11.21 INR (0.18 USD) for a 25-year
concession. The project was installed
under the public private partnership
(PPP) model (the rst of its kind in
rooftop solar). The model attracted
private clients, with Azure and
SunEdison building a portfolio of 2.5
MW each of rooftop projects with a 25-
year concession to install solar PV panels
on government and residential buildings.
The programme started attracting
investments and in 2014, a similar model
was implemented in Vadodara for setting
up a 5-MW rooftop solar project based
on the PPP model. The project was
awarded to Madhav Solar Pvt Ltd for a
25-year concessional loan and attracted
investment of 8 million USD.
2010 20152014 20172012 2016 2018
20 GW solar
power by
2022
10,000 rooftop
programme-
Kerala
Delhi Proposed
to implement
rent-a roof
programme
100 GW solar
target by 2022
KfW
offered
LoC to
IREDA
NDB offered
loan to
Canara Bank
Installed
rooftop
capacity-
1063 MW
Investment –
capital cost
Programme
implementation
agreement
Rooftop lease
for 25 years
Generation-based incentive
(bid tariff – FIT)
Incentive at 3 INR/kWh
(0.05 USD/kWh)
Power infusion from
solar rooftop project
Returns – profits Incentive from power
sold at bid tariff
Gandhinagar (the capital city) as a ‘solar
city’. Though Karnataka, in parallel, also
launched the 25,000 roofs programme for
5–10 kW rooftop systems, major success
was seen only in the Gujarat programme.
Various other programmes/schemes that
led to the growth of rooftop sector are
summarised below:
These two cases gave a push to the PPP
model for implementation in rooftop
solar PV. The model was well received
by other states of India like Odisha.
The Gujarat Energy Research and
Management Institute (GERMI) extended
support to the Government of Odisha for
implementing a similar model.
The framework of the PPP model
developed to support rooftop
deployment is illustrated below:
Market evolution
Gujarat
Rooftop Solar
Program
Utility
Project
developers
Supply of
rooftops
Public Private
Gujarat
government
Market evolution trend
Gujarat PPP framework
IFC
investment in
green
projects
Rent-a-roof
programme -
Gujarat – PPP
model
Net
metering
introduced
IFC - 5 MW
rooftops solar
projects - BOO
model
12 MW rooftop
project - Punjab
OPEX model
introduced in
India
ADB offered
LoC to PNB
GCF offered
LoC to
NABARD
World Bank
offered LoC
to SBI
IFC support to Bhavnagar,
Mehsana, Rajkot, and
Surat - PPP model
PwC26
2012
Net metering was introduced in India
in 2012 to facilitate the connection of
small renewable energy systems with the
grid in order to provide an impetus to
residential rooftop installations. Under
the net metering scheme, the excess
power generated from the rooftop solar
system is fed into the grid and the system
owner is credited against the units fed.
The major benet of net metering was
for customers, who would be required to
pay only the differential of the electricity
consumed and credited to the grid.
2012–13
Rooftop programmes: Karnataka,
under its solar programme, targeted
25,000 solar rooftops of 5–10 kW. In
2013, Karnataka released a tender
worth 34 crores INR (5 million USD)
toset up 1.3 GW rooftop projects
across1,943houses.
Following this, Kerala also launched the
10,000 rooftop power plants programme
in 2012. Under this programme,
each applicant was eligible to apply
for a 1-kWproject only and the state
government also offered a discount of
39,000 INR (~580 USD) on project
installation in addition to a 30% capital
subsidy offeredby MNRE.
2015
Revision of solar targets: In 2015,
the Government of India revised the
JNNSM’s earlier target of 20 GW to 100
GW solar by 2022. This target of 100 GW
includes 40 GW from rooftop solar PV. In
order to meet these revised targets, the
government announced other initiatives
such as 30% capital subsidy on rooftop
systems, achievement-linked subsidy
scheme and accelerated depreciation
benet to promote the growth. Later
on, these incentives and schemes were
revised based on the deployment and
sustainability of the market.
2015-16
Largest rooftop PV plant: In 2015,
Punjab commissioned a 7.5-MWp
rooftop project on a single roof. Later,
TATA Power Solar commissioned a 12-
MW rooftop solar project in Amritsar
on a single roof under a gross metering
arrangement with a PPA signed with
Punjab State Power Corporation Limited
(PSPCL) for 25 years. This project was
the largest solar rooftop project in the
world to be set up in a single phase. The
project produces 150 lakh annual units
of electricity and saves 19,000 tonnes of
carbon emissions each year.
2016
Interest in the operational expenditure
(OPEX) model: In order to support
the growth of the rooftop solar market,
the OPEX (Renewable Energy Service
Company [RESCO]) model was
introduced in parallel to the capital
expenditure (CAPEX) model. The benet
of the OPEX model was that no upfront
capital investment was demanded
unlike the CAPEX model. Under this
model, consumers pay monthly charges
based on the units consumed for setting
up rooftop projects. However, the
ownership rights of the system are held
by the installer (RESCO).
2016-18
International line of credit to
support rooftop deployment in
the country: The rooftop sector in
India is lagging behind in meeting the
annual installation targets set by the
Government of India. The major reason
identied was the lack of low-cost
nancing in this area. Huge upfront
cost and high-cost loans contributed
to the slow growth. However, for the
past 2 years, rooftop solar has been
able to gain scale with the availability
of international lines of credit from
various multi- and bilateral institutions
to support domestic banks. This has
created developer and consumer interest
in the rooftop solar sector and at the
same time, the rooftop systems, with the
availability of concessional nancing,
have become nancially viable for
endconsumers.
Year Lender Borrower Line of credit Programme objective
2015 KfW IREDA 340 million
USD
To address the key barrier of financing
in rooftop solar PV in India; IREDA
launched a loan financing scheme @
interest rates of 9.9–10.75% with 9-year
repayment and a 1-year moratorium
2016 World Bank
and CTF
SBI 625 million
USD
Programme for results (PforR) to
support government strategy for
enhancing and expanding its rooftop
solar development targets; expand and
incentivise the market for rooftop solar
by way of low-cost financing
2017 Asian
Development
Bank and
CTF
PNB 500 million
USD
Finance-large scale rooftop solar
systems on industrial and commercial
buildings throughout India; contribute
to the government’s plan to increase
solar power and meet carbon emission
reduction targets
2018 Green
Climate Fund
Tata
Cleantech
Capital
through
NABARD
100 million
USD
First private sector facility to support the
rooftop solar segment — commercial,
industrial and residential housing
sectors; the programme aims to provide
concessional loan assistance to rooftop
solar PV
Available lines of credit to support rooftop deployment
27
The biggest push to rooftop deployment
shall, however, result from the
availability of innovative and low-cost
nancing structures that can boost the
scale of the sector. Banks play a very
crucial role in the development of this
sector by providing subsidised loans
to developers and end users. One such
contribution has been extended by the
Clean Technology Fund (CTF) supported
by other multilateral agencies like the
World Bank and Asian Development
Bank (ADB). The World Bank signed
a 650 million USD agreement with
the State Bank of India, while the ADB
signed a 500 million USD agreement
with Punjab National Bank (PNB). Both
multilaterals will combine the share
of CTF received, with a specic focus
on the deployment of rooftop solar
projects. In this scenario, the available
concessional nancing from the CTF is
adding signicant value. Traditionally,
banks were sanctioning loans to rooftop
developers at a rate of 10–12% and in
some cases, the rate reached up to 14%
depending on the credit rating of the
borrower and the risks associated with
the project. The banks were offering
higher interest rates due to the absence
of any concessional funding support
and limited experience in the rooftop
segment in India. However, with the
availability of CTF money, the interest
rates for lending project loans has been
reduced to 8.5–9.5% on a project-to-
project basis, offered by the banks
receiving such concessional funding.
The nancial structure and the
implementing agencies involved in
the current World Bank and ADB
programme are illustrated below:
The above programmes are proposed to
support the implementation of the grid-
connected rooftop solar programme of
MNRE, with a major focus on mobilising
private sector equity investments and
commercial lending, thereby increasing
the deployment and uptake of rooftop
solar PV to achieve the Government of
India’s target of 40 GW by 2022.
MNRE, the lead ministry responsible for
rooftop solar targets, is playing a major
role in providing overall policy guidance
and coordinating with the development
partners. The ministry will also ensure
that the lessons from these programmes
are internalised in other government-
supported initiatives.
Banks (SBI and PNB) will be the
implementing agency, lending loans to the
developers, customers, aggregators and
intermediaries that are qualied in terms
of technical capacity, relevant experience
and creditworthiness as per the respective
bank’s loan scheme document. This access,
available at low cost, will enable large-
scale deployment of rooftop solar using
different business models.
Distribution utilities are majorly
responsible for providing and operating
grid power and the network and in turn
manage the grid integration of rooftop
projects. Distribution Companies are also
responsible for providing timely approval
on net metering and other regulatory
and technical clearances. To support the
DISCOMs, the programme also plans
for their capacity building for efcient
management of grid integration of these
variable rooftop projects.
States, on the other hand, are also
supporting the rooftop deployment
programme by announcing their
respective rooftop policies or targeting
rooftop capacity addition in the solar/
renewable policy. Thus, state nodal
agencies (SNAs) play a major role in
deploying the grid-connected rooftop
programme at the state level and at the
same time encouraging developers to
install possible rooftop projects in the
identied commercial and industrial
locations. SNAs, in coordination with
central agencies, are also promoting
rooftop systems by identifying
relevant government buildings for the
deployment of rooftop projects under
the MNRE subsidy scheme.
Loans/ LoC
Concessional finance + Grant (small amount)
Target marketsLoans
Government of India backed security
Multilateral
agencies –
World Bank,
ADB
Solar
rooftop power
developers/
aggregators
Commercial
enterprises
Industrial
units
SME
industries
Public sector
banks – SBI,
PNB
CTF
Schematic of concessional funding
PwC28
The rooftop solar market has majorly
been driven by the CAPEX model
in which the consumer fully owns,
nances and consumes the energy
generated from the PV system. The
consumer, in turn, is fully responsible
for all capital expenditures and bear all
risks of operations, management and
maintenance. The other model which
evolved lately is the OPEX model or
third-party nancing model in which a
97%
94%
92%
89%
84%
71%
3%
6%
8%
11%
16%
29%
0%
20%
40%
60%
80%
100%
2012 2013 2014 2015 2016 2017
CAPEX OPEX
Source: PwC analysis
RESCO provides all necessary capital for
installation, operation and maintenance
of the rooftop system. In exchange for
all services and risks, consumers sign
a PPA with the RESCO. This OPEX
model has started picking up pace as
it is becoming one of the promising
solutions to address several barriers
to scaling rooftop solar PV. This model
is expected to dominate the rooftop
solar market, considering the benets
to consumers in terms of no upfront
capital and installation cost as well as
the elimination of operational risks and
management services. However, the only
challenge to the current low growth of
this OPEX model is the lack of low-cost
debt capital, which affects the ability of
companies to advance it. The growth
of the OPEX model in the past six years
ispresentedbelow:
Market share of CAPEX and OPEX model in India (rooftop solar)
29
In India, the residential sector has been
highly subsidised and the system sizes
have been extremely small. This has
resulted in lower nancial viability of
rooftop solar PV installations. However,
analysing the commercial and industrial
(C&I) sector, the grid tariffs resulting
from cross-subsidy charges have been
increasing, encouraging C&I customers
to switch to rooftop solar PV and make
huge savings in their monthly electricity
bill. It is from this demand that the
identied nationalised banks (SBI
and PNB) are targeting to support C&I
customers in the deployment of rooftop
solar PV in India. Another positive factor
is the lack of government subsidy along
with the higher demand for rooftop as
compared to the residential sector. With
CTF money available at concessional
rates, the interest rates for project
nancing are comparatively lower than
the traditional project nancing terms
of other banks. Hence, the end user (the
C&I segment) gets the lowest possible
rooftop PV tariff/system cost which
enables them to make huge savings.
Depending upon the business model
chosen, the end user gets the benet
of low-cost nancing. This benet is
further increased with the aggregator
business model, where the banks
disburse lump sum money to the
selected aggregator holding a portfolio
of projects. Developers/aggregators,
in turn, purchase bulk equipment at
reasonable rates, thereby providing the
most competitive rates/tariffs to the
end customer. This model, with CTF
money added, is gaining signicant
scale in the country. However, analysis
in this regard has proved advantageous
to each stakeholder involved and
projects with this aggregator model
are being evaluated for disbursement
and execution by the respective banks
(SBIand PNB).
Additionally, the residential sector as
well as government buildings in India
is eligible for a subsidy arrangement
announced by the Government of
India. However, even with a 30%
capital subsidy for the residential sector
for rooftop installations, the highest
penetration has been seen in the C&I
segment, contributed to mainly by the
large system size (due to larger space
and higher demand) and the higher grid
tariffs. Thus, not just subsidy, demand,
penetration and project viability are also
major factors driving the sector growth.
To compare the viability of rooftop solar
systems with the grid tariffs, electricity
tariffs for the past three years in all
segments have been analysed for four
Indian states that were selected based on
the following criteria:
Rooftop Installed Capacity share (Sep 2017)
Residential, 20%
Industrial, 43%
Government/Public Sector, 16%
Commercial, 21%
The percentage share of all segments in the rooftop sector is presented below:
Solar irradiation (greater than 5 kWh/
m2/day), rooftop solar targets assigned
by MNRE (greater than 2000 MW until
2022) and state interest in terms of policy
and capacity installation.
Target market
Rooftop installed capacity share (India)
PwC30
A comparison with all the major
customer segments presents the most
viable case for commercial consumers
where the grid tariffs are quite high and
are further expected to increase. Though
most states like Tamil Nadu and Punjab
have xed their grid tariff for certain
consumer categories for 3–5 years, solar
tariffs, which are expected to fall further,
remain competitive. Huge savings in
electricity bills and contribution to the
green effect have led to widespread
demand for rooftop solar PV. However,
certain gaps like project nancing and
agreements with distribution companies
need to be addressed to gain strong
momentum in the sector.
0
5
10
15
Karnataka Maharashtra Tamil Nadu Gujarat Rajasthan MP
Tariff (Rs./kWh)
Commercial
Andhra Pradesh
FY 15 FY 16 FY 17 Solar Tariff
Karnataka Maharashtra Tamil Nadu Gujarat Rajasthan MPAndhra Pradesh
FY 15 FY 16 FY 17 Solar Tariff
0
2
4
6
8
10
Tariff (Rs./kWh)
Industrial
Rooftop solar viability in various segments
Tariff (INR/kWh)
Karnataka Maharashtra Tamil Nadu Gujarat Rajasthan MPAndhra Pradesh
FY 15 FY 16 FY 17 Solar tariff
0
1
2
3
4
5
6
7
Residential
31
Policy Regulation
Utilities
Technical Funding Agency
Generation Transmission Distribution
Central Level
Ministry of Power
Ministry of New and
Renewable Energy
Solar Energy
Corporation of India
NTPC Vidyut Vyapar
Nigam Ltd (NVVN)
Central
Electricity
Regulatory
Commission
(CERC)
National Thermal Power
National Hydro Power
Corporation (NHPC)
Neyveli Lignite Corporation
(NLC)Corporation(NTPC)
North Eastern Electric Power
Corporation Limited (NEEPCo)
Central
Transmission
Utility (CTU)
Power Grid
Corporation of
India Limited
(PGCIL)
Central
Electricity
Authority
(CEA)
Indian
Renewable
Energy
Development
Agency (IREDA)
State Bank of
India (SBI)
Punjab National
Bank (PNB)
State Level
“State Energy
Development Agency
(Nodal Agencies)
eg. Gujarat Energy
Development Agency
; Maharashtra Energy
Development Agency
“
State
Electricity
Regulatory
Commission
(SERC)
State Power Generation
Company (GenCo)
State
Transmission
Utility (STU)
State
Distribution
Company
(DisCom)
Private Sector
“Independent Power Producers:
ReNew Power Limited
Amplus Solar
Adani Solar
CleanMax Solar
Cleantech Solar
Hero Future Energies
Acme Cleantech
Tata Power Solar
IndiaBulls”
“Independent
Transmission
Service
Providers:
Tata Power”
“Private
DisComs:
Tata Power
Delhi
Distribution
Ltd.”
Private
Banks: Yes
Bank; Canara
Bank; other
multilaterals
With the 40 GW target for rooftop
solar PV for 2022 and only around
1GW on ground as of date, the various
stakeholders involved need to play a
signicant role in the scale-up plan. Each
stakeholder, including policymakers,
nodal agencies, distribution utilities,
developers, banks and end consumers,
have to contribute to the deployment
of rooftop solar PV. Some of the major
stakeholders that can contribute to
rooftop solar growth are listed below:
Key stakeholders
Key players in rooftop solar sector
PwC32
India’s path to achieve 4 0GW from
rooftop solar installations by 2022
has seen considerable efforts from the
government, regulatory commissions
and other concerned agencies in terms
Lack of capacity building on rooftop
systems- DisComs view of losing revenue
from customers
• Lack of single window facility for project
clearances
• Limited technical expertise on grid
integration of small scale rooftop systems
• Limited availability of low cost project financing
• Credit rating of customers/payment security
• Availability of feasible roofs for project
installations
• Delay in subsidy; affecting project financials
• Subsidy delays
• Delay in project clearances
• Lack of availability of low cost systems
with poor quality; hence quality /system
performance marks a challenge
• Gaps in Net Metering regulations
• Non-Compliance of RPO by eligible entities
• Availability of collaterals
• Credit rating of customer/Payment insecurity
• Challenge in rooftop rights of individuals
• Non-availability of secondary market
• Small size; high cost of financing
• Lack of standard PPAs- deemed generation
missing in most PPAs
The roles and responsibilities of the various stakeholders responsible for
implementing rooftop solar PV projects in India are represented below:
Each stakeholder has his own roles that are quite critical for the deployment of
rooftop solar PV in India. However, at this stage, each stakeholder has a set of
concerns and these need to be addressed either through capacity building or training
programmes to get a full scale up.
Banks/ Financial Institutions
• Providing subsidized project financing/
lending terms
• Supporting new and existing business
models
• Identifying customers/ developers
(aggregators) to promote deployment
of rooftop solar
• Efficient means of Engineering, Procurement
and Construction of rooftop projects
• Sustainable and most competitive tariffs, to
promote deployment
• Targeting end consumer, promote scalable
business models
• Provide clarity on permitting provisions,
safety provisions, interconnection
provisions, clearances, etc.
• Timey closure of approvals for net-
metering arrangement/ No-Objection
Certificate for rooftop projects
• Identify the benefits/ need for solar rooftop
projects, considering the savings model
• Support in achievement of National
Targets for rooftop PV
• Defined policy and yearly plans for
achievement of targets
• Timely release of subsidy for rooftop
projects
• Support in timely closure of projects with
grant of timely approvals/ clearances
• Release of state tenders to invite interest
of developers/ end consumers
• Strict penalty on non-compliance of
Renewable Purchase Obligations
• Sign PPA with the government buildings
Rooftop Developers
Distribution Companies
End Consumer
Policy Makers- Central Govt.
State Nodal Agencies
Role of Stakeholders
Role of stakeholders in rooftop solar deployment
of incentives, policy and regulatory
framework, etc. With these efforts, a
basic framework exists in all parts of the
country and growth has been seen in the
rooftop market. However, to achieve the
40-GW target by 2022, various gaps need
to be addressed at each stakeholder level
to attain exponential growth in the sector.
The gure below maps out the challenges faced by each stakeholder on the path of
rooftop solar deployment in the country.
Solar rooftop challenges
Rooftop
challenges
across
stakeholders
DISCOM Developers
End consumer
Regulatory bodies
Financial institutions
•
Key challenges
33
Financial challenges
One of the biggest challenges for the
slow deployment of rooftop solar PV
in India is the limited availability of
nancing. Rooftop projects, being
smaller in size compared to utility-scale
projects, banks/nancial institutions face
signicant challenges, one of which is
collateral security from small enterprise
or residential customers. Since the sector
is still gaining maturity in terms of size
and generation (capacity utilisation
factors), the funding risk is a major
barrier faced by nancialinstitutions.
Also, for similar due diligence as in
large-scale solar projects, the lender’s
engineer fee component increases for
rooftop projects due to the limited size
and increased number of scattered
locations. Various models, including the
aggregation model and concessional
interest rate options, have been tried by
various nancial institutions; however,
the scale is yet to be picked up.
Another challenge related to the limited
interest of domestic nancial institutions
is the credit rating of customers which
results in payment risks from customers.
Additionally, though debt funding
is available for setting up a rooftop
project, there is limited equity
investment being made in the rooftop
projects. Investorsare focusing on the
deploymentof utility-scale projects
because of lowerrisks associated.
Debt funding available for rooftop solar
projects through domestic sources is at
a very high interest rate, which makes
the projects nancially unviable. Various
initiatives, however, have been taken on
this front through the use of concessional
funding and other international lines
of credit, which has helped in bringing
down the interest rates by 1.5–2%.
However, limited availability of these
international concessional funds is
posing a challenge for future projects.
Technical challenges
Since rooftop solar projects are quite
small in size compared to large utility-
scale projects, grid integration of these
variable solar projects is a challenge
faced by most distribution utilities. For
this, most multilateral and bilateral
agencies are focusing on capacity
building programmes for DISCOMs and
bring in international learnings on grid
integration solutions.
Limited technical strengths of the
lender’s engineer, on the other hand,
in carrying out due diligence activities
and appraisal of rooftop solar projects
are a signicant challenge slowing down
rooftop solar deployment.
Policy and regulatory challenges
Some of the incentives offered by the
Central Government includes Central
Financial Assistance (CFA) of 30% on
residential and government buildings.
This incentive, however, is posing a
bigger challenge for developers as
subsidies get delayed and developers
suffer nancial loss in terms of cash
ows projected. These delays prevent
developers from executing projects
on residential spaces or other target
markets where any subsidy arrangement
is offered. The market, on the other
hand, has almost reached grid parity
in most sectors; hence, subsidy in
such cases actually spoils the market
growth. The changing tax structure and
implementation of duties are posing
challenges to the growth of rooftop
solarsector in India.
Another barrier to progress in the case
of the OPEX model is the delay in getting
approvals and clearances for the net
metering arrangement. Though single
window clearance exists, the delays in
approvals (including Chief Electrical
Inspector General [CEIG] approval)
affect the timely execution of projects.
Non-standardisation of PPAs to include
certain terms like deemed generation
and right of way are posing a challenge
to nancial institutions in executing
respective projects. Non-availability of
these terms increases the risk of banks/
nancial institutions, thus affecting the
overall cost of the rooftop project.
The challenges in the rooftop segment can be classied as follows:
Commercial challenges
Though non-availability of FiT in rooftop
projects has helped bring down the
tariffs, a competitive mechanism, on the
other hand, actually poses a bigger risk
to large and serious players. With limited
eligibility criteria in bid proposals, most
small players bid at an exceptionally low
tariff, thereby disrupting the market.
Most large-scale developers also fear
this as a challenge in terms of quality
of equipment offered at such low
tariffs. Most of these projects, unviable
at a low cost, are later put on sale for
acquisition which, in turn, affects the
quality and generation from the project
and at the same time results in loss of
customerinterest.
PwC34
For successful and smooth operation
of rooftop solar PV systems, business
models based on various situations and
conditions have been identied and
tested in the country. However, there is
no model that ts all requirements and
hence the models vary according to the
requirements of the end customer. They
are designed as per the specic needs of
the individuals and the legal framework.
Rooftop solar systems can thus be
classied based on system ownership,
metering arrangement (the way
electricity is billed inuences the
protability of the PV investments) and
off-taker arrangement which are further
classied based on customer needs.
Sale to DISCOM under
State/Centre Policy
Sale to distribution
licencee for RPO
Sale to third party under
open access regime
Sale through group captive
under open access
Sale under REC mechanism
Net metering
Gross metering
CAPEX model
RESCO model
Aggregator
model
Lease model
Business models
Grid-
connected
solar
rooftop PV
Based on
system
ownership
Based on
metering
arrangement
Based on
off-taker
arrangement
Solar rooftop business model in India
35
1. CAPEX model
Currently, the most prevalent model
for rooftop solar installations is the
CAPEX model where the rooftop owner
buys the rooftop solar system, owns
the system and uses the benet of the
generation for internal consumption.
The customer may or may not take a loan
to fund part of the investment and may
or may not have availed capital subsidy.
This model has the advantage of being
simple and uncomplicated; however,
the rooftop owner bears the risk of the
project. Around 90% of all rooftop-based
solar project capacity installed so far
in India falls under this category. The
CAPEX model has been one of the most
widespread models in Germany where
low-cost loans (as well as generous
subsidies) have helped propel the market.
The CAPEX model has been the most
preferred business model because of
the various advantages such as quick
payback period, risk-adjusted returns
over longer duration, low payment risks
and sole ownership of all power sources.
There are some challenges associated
with this model such as requirement of
upfront capital, high interest rates on
the money borrowed, delays in subsidy,
etc., but these can be mitigated with the
availability of concessional loans.
2. RESCO model (or OPEX model)
In the OPEX (Operational expenditure)
or third-party model, a RESCO invests
capital in the rooftop solar system
and sells power to the rooftop owner/
occupier at a rate lower than their grid
tariff but at a rate which enables the
RESCO to make a prot. This model is
often called the OPEX model because the
rooftop owner pays for the system over
a number of years during its operation.
The ‘third party’ refers to the company
entering the typical relationship between
the building owner and distribution
utility as the third party. These projects
account for around 10% of the rooftop
solar installed capacity.
The key advantage of this model is
the technical risk that is taken up by
the RESCO, and thus, the rooftop
owner does not need to invest capital
upfront. This reduces the liquidity risk
and provides better tax benets. The
OPEX model has been quite prevalent
in the US, where this model along
with tax breaks proved attractive to
a large numbers of consumers. Like
other models, this model also has some
challenges such as high payment risks
associated with long-term PPAs and legal
risks arising due to availability of land
that can be mitigated by the availability
of concessional funds.
Torrent Power
(Pvt DisCom in
Gujarat)
Azure Power
Aggregated Government and
residential rooftop sites
SunEdison
Aggregated Government and
residential rooftop sites
Classication based on system ownership:
3. Lease model
A third option in the rooftop system is
the lease model, in which the customer
leases the system from an installer/
developer but pays for it over time. This
lease may be either a nancial lease or
an operating lease. At the end of the
lease tenure, the asset is fully transferred
to the customer. Thus far, the lease
model is not popular in India because of
the way taxes currently apply to lessors.
This model provides balanced cash
outows, thus enabling better use
of capital and lower planning risks.
However, there are certain issues
associated with payments such as
payment default issues, limited tax
benets, reduced returns for equity
holders and ownership issues. Most of the
risks associated with payment and returns
on equity can be minimised through the
availability of concessional loans.
4. Aggregator model
Under this aggregation model, the third
party/RESCO, aggregates the demand
of various customers and installs
rooftop solar captive power plants up
to the total capacity of the cumulative
contracted load of the selected group
of customers connected with the same
distribution transformer. This model
helps the aggregator to gain scale and
offer the most competitive pricing. This
model is now picking up pace in India
and has been tried by various DISCOMs
and banks. The ow diagram for an
aggregator model used in Gujarat is
illustrated below:
Off-taker
Developer/
Aggregator
Customers
Aggregation model in Gujarat
PwC36
The model is also being tested by
various corporates where procurement
of renewable energy is increasingly
becoming a central piece of companies’
corporate sustainability strategy.
However, the size of rooftop deployment,
in most cases, is limited due to the
lack of space on individual roofs. This
limited size of projects also increases the
transaction cost for the RESCO/vendors,
thereby decreasing project viability.
Hence, if this demand from various
corporates is aggregated to improve
project size (which shall signicantly
improve the project economics),
the deployment of rooftop shall
increaseexponentially.
This model is the most preferred
because of certain advantages such
as low transaction cost, economies of
scale, better risk management, lower
risk of project failure arising from any
one individual buyer and combined
creditworthiness of buyers. These
factors help mitigate the nancial risk
to project developers and also support
them in reducing project nancing
costs. However, there are few challenges
associated like PPA risks, ownership
risks, issues faced with DISCOMs, but
these can be minimised by making
concessional funding available.
Financial institutions are also supporting
the aggregation model as it saves both
time and resources for conducting
project due diligence. The aggregation
is done, mainly, at the developer’s level
as the projects are offered for nancing
at the level where either the PPA (with
selected off-taker) is already signed, or
negotiation with the off-taker has been
done. Hence, at this stage, the projects
are already aggregated by developers.
Thus, banks have a limited role in
aggregating the projects.
Few non-banking nancial companies
(NBFCs), however, consider aggregating
small-size projects that are under the
ambit of single DISCOMs (to avoid the
challenges of dealing with different
distribution utilities for the clearance
and billing process) and preferably
in a single large city (most nancial
institutions with limited presence across
India consider limiting the projects to
larger cities in order to reduce cost). The
developers, on the hand, aggregate these
projects either based on their location,
with the selected projects connected
to the same distribution utility or the
demand aggregated based on the
consumer category. In order to gain
a complete line for rooftop nancing,
developers are also aggregating the
portfolio of projects so that the project
nancing cost can be signicantly
reduced and end consumers can be
offered competitive tariffs.
The model has been used quite
frequently in the available lines of
credit offered by banks like SBI and
PNB where the complete portfolio of
projects is offered a line, and major
developers are aggregating demand to
avail this concessional line of funding.
The schematic of the aggregator
modelisrepresented below:
Economies of scale
Buyers of various sizes
Concessional rates;
huge savings
Cheaper pricing
IPPs/project
developers
Single large
bundle of demand
for rooftop
solar power
Rooftop solar aggregation model
37
Payment
Payment
Roof rental as per lease agreement
Develops and Installs
PPA at Fit Net Metering Agreement
Savings in
electricity bill
System on rooftop
Private PPA price or share of savings as per the agreement
1. Gross metering
Gross metering is the arrangement
which measures generation and import
of grid electricity separately. By metering
the total number of solar energy units
generated and total number of units
consumed, gross metering allows the
utility to charge customers separately for
import, generation and net consumption.
This is imposed by having two separate
meters or dual metering (dual element
electronic, import and export meter).
In this type of arrangement, all of the
energy generated is exported to the
grid and the consumer gets no incentive
to increase self-consumption. In this
arrangement, the PPA is signed between
the owner and the utility where the
utility agrees to pay the owner either
FiT or tariff as xed by the regulatory
commission of each state. Systems can
be installed by either the roof owner
(self-owned) or by a third-party player
who enters into a roof lease agreement
with the roof owner.
2. Net metering
Net metering is the arrangement under
which power generated is rst consumed
internally and the excess energy, if any, is
fed to the grid that can be commercially
settled with the distribution utility
based on the net metering regulation
ofrespective state.
Further, based on the ownership pattern,
the net metering arrangement can be
oftwo types:
1. RESCO: In this model (see gure
below), the third party owns the system
on the rooftop of the consumer. The
electricity generated from the project
is consumed by the rooftop owner
(consumer) at a mutually agreed tariff
as per the PPA signed between the
consumer and the RESCO. In case of
excess generation, the surplus power
is fed into the distribution grid and
the same can either be adjusted in the
monthly bill of the consumer or the
distribution utility can provide banking
facility for a particular time period as
dened in the state regulation. In case
the owner is generating more energy,
then the excess energy is sent to grid and
the owner is paid for the excess energy
generated. If the electricity generated is
lower than consumption, then the owner
has to pay the differential of excess
energy consumed as per the regional
tariff. The RESCO, on the other hand,
might include the clause of sharing of
revenue in case of excess generation.
Classication based on metering arrangement:
Distribution
Utility
RTPV System
3rd Party
Developer /
RESCO
Beneficiary
RESCO flow diagram
PwC38
2. Self-owned: In this model (as shown
below), the rooftop owner installs a
solar PV plant through the EPC mode
(operation and maintenance [O&M]
might be outsourced) and continues to
own the system. The power generated
is consumed by the rooftop owner and
any surplus power generated is fed to
the grid, with an arrangement of paying
for the surplus power fed or banked, as
allowed in the state net metering policy.
The rooftop owner pumps its own equity
and arranges the loan for the project.
Hence, the owner evaluates the payback
period and returns generated from
the installed system while replacing a
certain part of power from the grid. No
tariff is applicable on the rooftop owner
for solar power generated.
Payment
Regular Maintenance
Develops and Installs
PPA at Fit Net Metering Agreement
Savings in
electricity bill
System on rooftop
Annual Maintenance Contract/ O&M agreement signed at a mutually agreed price
Installation fee
Bank
RTPV SystemEPC / Installer Beneficiary
Self-owned flow diagram
39
1. Sale to DISCOMs under Central/
state policies and plan
Under this model, the generated power
is sold to the state DISCOMs under the
Central or state policies or any other
state plans in future. Most of the Indian
states have specic plans for setting up
renewable energy projects in the state.
The projects can be set up under such
policies and the power generated can be
sold to the state DISCOMs.
2. Sale to distribution licensee for
meeting Renewable Purchase
Obligation (RPO)
This model essentially involves sale
of power generated by a rooftop solar
power plant to the distribution utility
to meet the Solar RPO for the state.
Under this power off-take option, the
utility will have to enter into a PPA
with the purchaser or the distribution
utility. Such a model is time-tested and
comparatively less complex. However,
the lesser complexity of this power sale
model comes at a price of dependence
on the willingness of the utilities to
procure renewable energy power and the
creditworthiness of the utilities to pay
for the power purchase.
3. Sale to third party under open
access regime
The model involves sale of energy
to an open access consumer of the
same DISCOM area within which the
generator is located or to a different
DISCOM within the state, using the
network of the DISCOMs or transmission
companies in order to wheel the power
from the point of injection to the point
of usage. Such a market model of
third-party sale is largely made feasible
with the introduction of provisions for
open access transactions specied in
the Electricity Act, 2003, and through
the subsequent regulations framed
by the State Electricity Regulatory
Commission. The Electricity Act, 2003,
denes open access vide section 2(47),
reproducedasunder:
‘Open access’ means the non-
discriminatory provision for the use of
transmission lines or distribution system
or associated facilities with such lines
or system by any licensee or consumer
or a person engaged in generation in
accordance with the regulations specied
by the Appropriate Commission.
Open access allows a bulk consumer,
according to the framework developed
by the appropriate commission, to
contract directly with the generation
company or with any other source
of supply (other than the incumbent
distribution licensee in whose area the
consumer is situated). The open access
framework also offers the generating
company the freedom to supply power
to consumers who are eligible to
availopenaccess.
Classication based on off-taker arrangement:
4. Sale through group captive under
open access regime
This model is very similar to that of the
third-party sale model discussed in detail
in the above section. However, in this
model, the consumers need to have a
minimum level of stakeholding in the
rooftop project set-up. Hence, in case
a developer wants to set up a rooftop
project and sell power through the group
captive route, then the shareholding/
capital structure of the rooftop project
should be such that the plant gets
qualied as a captive generation plant.
5. Sale under the Renewable Energy
Certicate (REC) mechanism
Under the REC mechanism, one REC
will be issued to the renewable energy
generator for generating 1 MWh of
electrical energy fed into the grid. The
RE generator may sell electricity to the
distribution company at the regulated
price equivalent of the average pooled
cost of power purchase by the utility
from all sources excluding renewable
energy sources and its RECs to obligated
entities at the market price through the
exchange mechanism in a transparent
manner. The RE generator may sell
the certicates only through power
exchange to such obligated entities
who have to meet their RPO target.
The purchase of RECs will be deemed
as a purchase of power generated from
renewable sources and accordingly will
be allowed for compliance with the RPO
target. The REC mechanism will enable
obligated entities in a state to procure
RECs generated from any of the states
in India and surrender the same to
fulltheirRPO target.
PwC40
The solar rooftop value chain comprises the following components:
The share of each component in the value chain is estimated as below:
%age share of rooftop components in total cost
Modules, 50%
Inverters, 9%
BoS, 29%
Project Financing, 2%
Project Development, 10%
Modules InboundInverters OutboundBoS
Firm infrastructure Human resource management
Procurement Technology
Concessional funding: Equity investments from pension funds, life insurance companies, PE funds, concessional
line of credit from DFIs/multilaterals
Support activities
Strategic
sourcing
LogisticsProject finance
Project
development
Vendor
management
O&M
Primary activities
Value Chain
Solar value chain
Percentage share in rooftop system cost
41
The value chain of rooftop solar projects
aims at strategic sourcing of raw
materials, procuring the best quality
goods and delivering them to consumers
at the right time, in the right quantity
and at minimal price, thus optimising
the overall value chain. Supply chain
management increases efciency by
minimising cost and hence improving
prot. Thus, there is a strong need to
focus on the supply chain of the solar
industry so that the costs are sustainable
and add value to the end consumer. The
downstream market—the developers—
are growing in terms of market share but
are struggling to deliver prots due to
strong competition.
While the supply chain focuses on
delivering the best output at each stage,
the value chain focuses on the value
generated by the construction of solar
panels/parks/rooftop projects at each
stage. Here, we would focus on the role
of value chain nancing, the need for it
and its impact on each of the activities of
the entire value chain.
Inverters, on the other hand, impact 10%
of the project cost. As of June 2017, the
top ve solar inverter manufacturers
in India account for 70% of the market
share. ABB leads the market with supply
capacity of around 5 GW followed by
SMA solar with supply capacity of 3
GW and Hitachi, Schneider Electric and
Chint have supply capacity of 2 GW each
as on June 2017.
The various activities involved in the value
chain for the construction of rooftop solar
projects are discussed below:
1. Strategic sourcing:
It aims at gathering information and
leveraging the purchasing power of
a company while procuring the raw
materials for manufacturing the solar
panels. This is not limited to solar
panels only but also includes inverters,
trackers and other balance of systems
(BoS). However, solar modules account
for the maximum portion of the solar
system cost (~50% of the project cost;
seeFigure 42).
Given the limited domestic module
manufacturing capacity in India (with
cells and other components imported),
domestic modules are comparatively
more expensive than imported modules.
Thus, large-scale procurement for
modules is done through imports.
Procurement for rooftop solar projects is
done mainly from Indian manufacturers
due to limited scale and size. However,
with increased deployment, the focus
will shift to bulk procurement to offer
competitive pricing.
India’s current installed module
manufacturing capacity is 8.4 GW,
10
while the operational capacity is only
5.5 GW because of obsolete technology
and sub-scale capacity. Module costs
impact 35% of the project cost. Adani
is the leading module manufacturer
with 1.2 GW module manufacturing
facility followed by Vikram Solar
(1GW), Waaree Energies and Emmvee
each with capacities of 500 MW.
However, the operational capacities
are 500 MW for each of the players
excluding Adani. According to MNRE,
Adani has no operational capacity as
of May 2017. The portfolio of key solar
module manufacturers is shown in
thegraphbelow:
1200
1000
500 500
400
300 300
250
210
100
0
500
500
500
300
150
180
50
0
100
0
200
400
600
800
1000
1200
1400
Adani Vikram Solar Waaree
Energies
Emmvee
Solar
Tata Power
Solar
Alpex Solar Renewsys MoserBaer XL Energy HHV Solar
Module Manufacturing Capacity (MW)
Installed Operational
5000
3000
2000 2000 2000
0
1000
2000
3000
4000
5000
ABB SMA Solar Hitachi Schneider Electric Chint
Supply Capacity (MW)
10 https://mnre.gov.in/file-manager/UserFiles/
information-sought-from-all-Solar-Cell-&-
Module-manufacturers-as-on-31052017.pdf
Module manufacturing capacity
Inverter supply capacity
PwC42
Thus, to support domestic
manufacturing in India, some kind
of concessional funding or subsidy
support is required. Subsidy support is
already available to support the market;
however, additional concessional
funding in the form of subsidised seed
funding can help large-scale deployment
of the manufacturing base in India. As
the manufacturing set-up involves huge
upfront capital, popular equity sources
like pension funds and private equity
(PE) rms which support the solar sector
in India need to be considered for equity
investment in the manufacturing sector.
Concessional sources of equity capital
with minimum returns can support the
scale-up in India.
2. Project nance
Project nancing involves long-term
nancing of the project either through
a recourse or non-recourse nancial
structure. Both debt and equity are used
to nance the project and the cash ows
generated are used for repayment of the
loan. In the case of the rooftop solar value
chain, project nancing plays a signicant
role at each step to improve the overall
output through thevaluechain.
Recent shift from traditional
mode of own equity by investors
(savings from other business to
claim tax benefits)
Move to IPO route, private
equity investments,
pension funds.
Huge interest in Indian market
due to the regulatory framework,
push towards renewable
energy, technology upgrading
and improved returns
Large portfolio of projects
with limited risk due to
PPA with Central and state
agencies, creating equity
urgency in the market
Huge interest from pension
funds and PE firms such as
Abu Dhabi Investment Authority,
Canadian Pension Fund,
Singapore Sovereign Fund;
PE firms investing in Solar and
Wind companies – Goldman
Sachs, GIC, I Square, Morgan
Stanley, etc.
Green Energy Commitments
by banks in RE-Invest 2015
Some of the leading banks
committing support to
renewable energy include
State Bank of India, IREDA,
ICICI Bank, L&T Finance, PTC
India, Yes Bank, and IIFC.
Total of around 121
crore INR committed by
approximately 29 domestic
banks to promote renewable
energydeployment
Various international lines of
credit (around 4.5 billion USD)
are supporting Indian solar
deployment.
Agencies like World Bank,
JICA, KfW, ADB, AfD, EIB
and GEF are supporting huge
investments, followed by blending
concessionary funds.
Agencies like KfW are investing/
funding the Green Energy Corridor
to support interstate/intrastate
transmission of renewable energy
Potential sources of financing
Debt
Domestic sources
Commercial banks/
NBFCs
Capital market (public
issue of bonds)
Foreign sources
Multilateral/bilateral
agencies
International banks
Promoter’s equity
Capital market
(public equity)
Private equity
Pension /sovereign funds
IPO launch
Equity
Financing instruments in India
43
3. Vendor management
This activity aims at managing existing
vendors as well as targeting new ones.
While procuring raw materials, it is
essential to obtain quotes, turnaround
time, service/product quality, evaluate
performance and maintain relationships.
Vendor management is important in not
only the manufacturing sector but also
the service sector (in this case, banking/
nancial institutions).
4. Logistics
The third step of activities is the
management of logistics which includes
transportation of goods from one
department to another in the value chain
at optimum price. It is easy to minimise
the logistics cost, and with a proper
understanding of how the carrying costs
involved work, it is possible to minimize
the inventory management costs.
Various sources reveal that the inventory
management expense helps to cut down
the logistics cost, but low-cost nancing
and lower interest rates help to optimise
the value chain.
5. Project development
Project development involves licensing,
due diligence, technical designing,
structuring and construction activities
for the project. As of December 2017,
around 350 infrastructure projects faced
a time overrun and a cost overrun of
around 2 lakh crore INR (29.6 billion
USD). This calls for strong project
management skills to avoid time and
cost overruns. Strong risk management
and technical expertise in managing
projects can prevent overruns.
6. O&M
It includes activities such as facility
monitoring, cleaning solar modules,
breakdown management, repair work
and warranty management. This stage
is quite critical as it affects the system
generation and life of the project.
Successful commissioning of rooftop
projects needs to be supported by
the most optimum and best possible
operation and management activity. Most
customers build the O&M cost into the
project cost so as to get the best possible
outcome with the investment made.
All the activities listed above need strong
technical domain knowledge as well
as functional and nancial knowledge
in order to create value and generate
prot out of the value chain. Thus,
providing loans at subsidised prices for
skill development is the need of the hour
to attract more players and make the
business protable.
The macro factors impacting the rooftop
solar sector are competitive bidding,
higher interest rates and high cost of raw
materials, thus diminishing the prot
margins of the developers and impacting
the landed cost of power with rooftop
systems. Despite the issues, there are
opportunities for growth and prot
throughout the solar value chain. To
survive in the current market conditions,
a strong focus on the following is needed.
Capital ows
Companies should track expected cash
inows and outows at a very detailed
level in the entire value chain. They
should look for low-cost nancing
options to leverage equity returns.
Solar project developers can check the
impact of cash ows at each and every
step of the value chain, and this would
help them with increasing equity for
projectdevelopment.
Increasing prots
Solar rooftop projects are easier to build
as compared to other power projects as
they substantially reduce the land and
infrastructure cost and also bring in
savings in terms of laying transmission
lines owing to the decentralised nature
of projects. However, lack of project
management skills leads to time and
cost overrun, thus affecting protability.
Since the solar rooftop industry is
growing at 82% Y-o-Y, companies are
focusing more on the execution of the
project. This calls for capacity building
of developers as well as nancial
institutions/banks. Larger players also
need to implement lean construction
techniques to increase productivity and
decrease labour costs.
The Government of India is focused on
producing clean energy and reducing
emissions by 2030. In recent years,
schemes such as Make in India
11
are
adding value to this sector with a focus
on the domestic manufacturing sector.
Currently, solar cell manufacturing
capacity is around 1.7 GW. Around
85–90% of the modules are imported
from China and this leads to a huge
forex transfer of approximately 20,000
crore INR (2.96 billion USD) because the
Chinese modules are around 10% cheaper
than Indian manufactured solar modules.
Apart from the few initiatives listed
above, the Indian government needs to
develop a larger policy framework to
support the domestic manufacturing of
solar panels. This will help in controlling
the revenue generated in the value chain
from going outside India.
Role of concessional funding:
The Government of India has offered
various incentives for manufacturing
modules in India such as capital subsidy,
operating cost subsidy and export
incentives. In December 2017, the Solar
Energy Corporation of India oated an
expression of interest (EoI)
12
for setting
up of 20 GW solar PV manufacturing
capacities in India. This shows the
government’s focus on developing India’s
local manufacturing capacity. Hence, the
concessional line of funding, if extended
to the Indian module manufacturing
supply chain, can provide a boost to
the manufacturing potential. This will
enable Indian module manufacturers
to compete with international markets
and contribute to the reduced landed
tariff for solar projects, which will in
turn lead to increased deployment and
impact the nal module price of Indian
manufacturers. The line of credit can also
be utilised for capacity development of
manufacturers by helping them to make
their plants operational and increase
production capacity by adopting the
latesttechnologies.
13
Corporates, these days, have realised
the potential savings of installing captive
renewable energy projects. Various public
sector players such as IOCL, ONGC and
CIL, and Central and state government
ofces are showing interest in setting
up solar projects. If subsidised loans are
provided to these players, they can utilise
their rooftop space for installing captive
projects and thus add to the government
targets of achieving 40 GW.
11 Make in India was a nation-building initiative started by the Government of India in 2014 to boost local manufacturing. It was started to make
India a global design and manufacturing hub.
12 http://seci.co.in/web-data/docs/EOI-%2020000%20MW%20Solar%20PV%20Manufacturing%20Scheme.pdf
13 https://mercomindia.com/seci-tenders-5gw-solar-manufacturing-capacity/
PwC44
While signicant capacity addition has been on large-scale utility solar power plants,
rooftop solar is picking up pace in India with the availability of innovative nancing
schemes and technology advancements, thus improving project economics. To
support this, both the World Bank and ADB are running rooftop programmes to
provide concessional funding through domestic banks.
Programme description
The proposed Grid-connected Rooftop
Solar (GRPV) Programme is the rst-
ever CTF-funded project that uses
an innovative nancing instrument,
Programme for Results (PforR), with
a focus on supporting government
programme and achieving outcomes.
The biggest challenge identied in
GRPV projects is the unavailability of
commercial loans to rooftop aggregators
and developers at a concessional rate
to support market growth. Hence, to
address this challenge, the current
programme was launched by making
long-term concessional nancing
available to stakeholders for large-
scale deployment of GRPV in India and
sharing international experiences on
the successful implementation of large-
scale rooftop programmes implemented
across the globe. The programme also
includes technical assistance (TA) and
capacity-building support to the major
stakeholders, including DISCOMs,
regulators, state agencies and banks.
The programme is designed for a ve-
year duration from September 2016
to September 2021 and includes fund
contribution from various institutions,
including CTF, IBRD, GEF, public and
private sector nancing agencies and SBI.
World Bank-SBI Rooftop Solar Programme
The funding from GEF is specically
focused on building a risk mitigation
mechanism to support lending to NBFCs
and small and medium enterprise
(SME) commercial and industrial
customers for GRPV as well as support
the strengthening of the investment
climate and capacity building of the main
stakeholders involved in the expansion
of GRPV. Additionally, CTF and IBRD
funds shall support the commercial bank
(SBI) in extending loans for GRPV at a
concessional rate (at or near the base
rate, dened as per RBI directives). Under
this programme, once the CTF and IBRD
funds are exhausted, SBI can continue
the second phase of this programme
with its own resources and/or through
syndication with other banks (which shall
be subject to availability of a creditworthy
pipeline of projects and success of Phase
1 of the programme). The rates of sub-
loans, under the second phase, can rise
depending on the project schematics.
The current IBRD-CTF programme has
a unique nancing structure, leveraging
multiple sources of funds from various
multilaterals and concessional funding
sources to support the reduction in the
interest rates for the GRPV.
The programme is designed along two
pillars: transformation and inclusion.
Under transformation, the programme
intends to achieve reduction in GHG
emissions through renewable energy
generation. Under inclusion, the focus
is on achieving access to electricity by
increasing availability of electricity
generation in the system. Additionally,
the programme emphasises on the
‘nance-plus’ approach, whereby
it goes beyond bank nancing and
contributes to transfer of knowledge and
international best practices, reform of
processes and systems, strengthening
of institutional capacity, and exploring
innovative nancing mechanisms. The
programme is designed to support the
World Bank’s corporate commitment to
increase renewable energy lending and
address climate change concerns.
The current programme supports all
major business models prevalent in
GRPV implementation in the country.
The business models widely used in this
eld are depicted below:
Business Models
OPEX Model Utility-owned Model CAPEX Model
Rooftop Rental Model NBFC Model
Third-party model with no upfront
capital investment and outsourced
operating expenditures
Distribution Utility owned model
installed and maintained by Utility or
maintenance delegated to third party
Customer-owned model in which the solar rooftop facility
is owned, operated and maintained by the customer or
owned by customer and maintained by third-party
Third-party owned model with
solar panels on rented roof space;
power sold to DisComs at agreed
rate under gross metering model
Model under partnership of 2 parties- NBFC, having license to
make consumer loans and Business, looking to invest in solar
panels. Together rooftop installer is identified to find customers
interested in BOOT model
Financing instruments for the rooftop sector
45
Economic Agents & Global Community
• All economic agents engaged in supply chain- sub-
contractors, O&M providers
• Global community to be benefited from avoided
greenhouse gas emissions
Program Beneficiaries
Strengthening
institutional
capacity building
Market
development
of GRPV
Expanding
GRPV generation
PforR scope
The IBRD-CTF PforR intends to cover the
following three result areas.
Implementation arrangement
The implementation agency in
the programme shall include the
government, the lead ministry
responsible for achieving the
Government of India’s solar target
of 40GW rooftop solar PV with
MNRE providing overall policy
guidance, and SBI, the borrower and
implementing agency for PforR. Under
this programme, SBI will extend
loans to GRPV customers, developers,
aggregators and intermediaries based on
the technical qualication criteria and
creditworthiness of the borrower.
The PforR programme shall benet
all the stakeholders involved in the
GRPV project implementation. The
instrument will add signicant value to
implementation by (i) ensuring a sharp
focus on achieving the Government of
India’s targets; (ii) allowing exibility
in implementation and use of funds
through streamlined procedures; (iii)
supporting development of the bank’s
programme through institutional
capacity building.
• Includes technical assistance (capacity building) of main
stakeholders (building blocks):
• SBI; DISCOMS; state nodal agencies; accredited rooftop
PV inspectors; state power departments; state electricity
regulatory commissions
• Includes development and implementation of market aggregation
models for installers and customers with feasible roofs
• Undertake marketing and business development for deal origination
• Provide lending capital to developers/aggregators
• Target lending to SMEs, NBFCs
• Support installation of more than 400 MW grid-connected solar rooftop
PV systems using storage options:
• In case of CAPEX, minimum of 100 kWp capacity per project
• In case of RESCO, aggregated capacity of at least 1 MW, with sub-
projects of capacity not less than 20 kWp
GRPV customers & State Residents
• Customers to be benefited from electricity generated
• State residents to be benefited from improved
consumer education and consumer awareness,
reduced air pollution and improved health impacts
SBI & its Branches
• To be benefitted through strengthening of
institutional capacity building
DisComs
• To be benefitted from the electricity passed on
to their network through net metering or gross
metering and through technical assistance under the
programme design
Third party aggregators, developers, vendors
• To be benefitted through access to debt; allowing
business to grow
SNAs & SERCs
• To be benefited from technical assistance and
capacity building activities planned in the programme
PforR objectives
Rooftop programmme beneficiaries
PwC46
Source of finance Amount (million USD) Percentage of total
IBRD 500 63%
CTF (loan and grant) 125 16%
GEF (support TA to stakeholders) 23 3%
Private and public sector financing 150 19%
SBI 2 0.3%
Total programme financing 800 100 %
Programme nancing
The total programme budget is 800 million USD. The contribution of each agency is
presented below:
Programme status
With the concessional nancing terms,
SBI has been able to sanction around
356 million USD, adding to 575 MW
of solar rooftop capacity to the grid.
Some of the developers availing this
nancing include Azure Power, Amplus,
CleanMax, ReNew and others. The
capacity of projects sanctioned ranges
from 25 kWp to 16 MW. The key
outcomes of the programme includes
GRPV capacity deployment and
CO2 emission reduction (tonnes).
GRPV capacity deployment is mainly
focused on through the implementation
of third-party models in addition
to customer-owned models. The
focus is on the aggregation model
where access to working capital
will allow qualied private sector
developers and aggregators to buy
the required inventory, aggressively
acquire customers, and push for
large-scale deployment of rooftop
solar PV systems among customers
using different business models. In
terms of CO2 emissions reduction,
the planned programme intends to
reduce GHG emissions by 14.8 million
tonnes over the life of the project
comparedtothermalprojects.
Some of the installations (Project
Yamaha with 1,100 kW capacity)
completed under this programme
supported through SBI nancing
arepresented below:
The contribution from CTF comprises
a loan component of 120 million USD
on concessional terms and a grant of 5
million USD. CTF loans are offered under
softer concessional terms with a maturity
period of 40 years, including a 10-year
grace period, service charge @ 0.25% per
annum and principal repayments at 2%
for years 11–20 and 4% for years 21–40.
A management fee of around 0.45% of
the total loan amount (5,40,000 USD)
will be charged. IBRD funding, on the
other hand, has a maturity period of
19 years, including a grace period of 5
years. With these nancing terms offered
to SBI, the bank has been able to offer
nance projects to the project aggregators
and developers at interest rates of
approximately 8.45–9.5% (i.e. one year
marginal cost of funds based lending
rate [MCLR] plus 20–50 bps based on
the risk rating of the customer) and a
loan duration of around 15 years with 12
months (post the commencement date)
as a moratorium period.
Financing sources in the World Bank programme
Yamaha solar installation (1,100 kW)
47
ADB-PNB Rooftop Solar Programme
Project description
The CTF made another contribution to
support the Government of India’s 40 GW
plan by extending a line of credit to PNB
along with support from ADB. The total
nancing consists of a 505-million USD
multi-tranche nancing facility for the
Solar Rooftop Investment Programme
(SRIP). The facility is sovereign-
guaranteed and comprises 5 million USD
for capacity development TA. MNRE and
PNB would be the executing agencies for
the TA. Three major components of the
TA programme would be:
In this facility, PNB is the borrower
and India will provide a sovereign
guarantee to ADB for the programme.
The programme focuses on extending
PNB, in this arrangement, has an option
to utilise the ADB’s USD funds without
conversion. Based on the reimbursement
method, ADB will reimburse PNB in
either INR or USD, a decision to be
taken at PNB’s discretion to help it hedge
the foreign exchange risk. In casethe
disbursement from ADB is in INR,
the exchange rate will be determined
based on the INR-USD exchange rate
on the value date of the ADB foreign
exchangetransaction.
The fund ow arrangement under the programme is depicted below:
concessional loans to nance large
solar rooftop systems on commercial
and industrial buildings in India. The
programme shall include loan extension
under any possible business model (as
per the PNB guidelines and project
viability); however, the larger focus
will be on aggregated projects. The
TA component of 5 million USD is to
integrate the building blocks of the
Government of India’s rooftop sector
development initiative to ensure viable
market demand by strengthening the
capacity building of the borrower bank,
PNB, and other market development
elements. The programme comprises
funding contribution from ADB and CTF
on concessional basis.
The total duration of SRIP is December
2016 to December 2022.
The current scheme is targeted to
capture commercial, institutional and
industrial consumers, including MSMEs,
as the scale of deployment is high and
consumer interest in green energy is
high. At the same time, developers have
better credibility for payments from large
C&I consumers as compared to small-
scale residential rooftop owners.
The current SRIP is focused on achieving
ADB’s objective to double the annual
climate nancing from 3 billion USD
to around 6 billion USD by 2020. Of
this, 4billion USD will be dedicated to
mitigation that includes increased support
for renewable energy. The 500-million
USD multi-tranche facility is designed to
cover the following broad objectives:
USD
USD
INR
INR
Asian
Development
Bank
1 2
34
Punjab National
Bank
Rooftop
Aggregator/
Developer
PNB Institutional Capacity Building
Promote energy efficiency and
renewable energy
Promote energy sector reform,
capacity building and governance
Support India’s INDC targets to
lower emissions intensity
Financial intermediation, an
important instrument for on-lending
Maximise access to energy for all
1
2
3
4
5
Market Development
Awareness Campaign
Programme objectives
Fund flow arrangement
PwC48
Source Amount (million USD) Share
ADB loans
OCR 330 33%
CTF 170 17%
Equity (assuming 30% of project cost) 300 30%
Debt from commercial banks 200 20%
Sub-total 1,000
Technical assistance
CTF (grant) 5.0
Grand total 1,005
Programme nancing
The nancing under SRIP includes 330
million USD from ADB’s Ordinary
Capital Resources (OCR) and 170
million USD from CTF. The funds
from CTF are provided at concessional
terms with a maturity period of 40
years, including a 10-year grace period.
Principal repayments from years 11–20
would be 2% and from year 21–40 would
be at 4%. Additionally, a multilateral
development bank fee of 0.18% and
a service charge of 0.25% would be
applicable. Thus, CTF money is available
at a weighted average cost of funds
of approximately 0.25%. The total
investment under the ADB’s programme
comprises 1 billion USD (refer to Table 7).
Implementation arrangement
PNB will be the implementation agency
for SRIP. Under this programme, PNB
will establish a dedicated solar rooftop
unit with internal capacity to support the
programme implementation.
Since the programme is a multi-tranche
nancing facility, funding of 500 million
USD will be released in three tranches.
Tranche 1 of 100 million USD comprises
CTF fund with an implementation
duration of December 2016 to December
2018, tranche 2 of 150 million USD
comprising CTF and ADB funds with an
implementation duration of December
2018–2020, and the nal tranche of 250
million USD from ADB funds will have a
duration of 2020–2022.
ADB funds can be used by PNB to nance
up to 50% of the total project cost with
no upper limit on the project size. PNB,
additionally, may use up to 20% of this
fund to buy out qualied solar rooftop
loans from other nancial institutions
under each tranche in order to better
consolidate sector assets. Takeout
nance may include subprojects that
are either nancially closed or are in the
construction phase.
Project status
At the current stage, PNB has already
sanctioned 20 projects of 104.59 MW
capacity for 63.86 million USD under
this ADB-CTF credit line. The scale of
deployment foreseen is quite high with
projects worth around 150 million USD
in the pipeline.
Beyond deployment, PNB is also
focusing on removing the current
barriers hindering rooftop growth in the
country. For the same, PNB is conducting
awareness programmes along with
the ADB team for SNAs/DISCOMs
in Karnataka, Tamil Nadu and Goa.
Besides, sensitisation programmes are
being conducted in 16 states for potential
customers as well as eld functionaries
at more than 10 zonal headquarters.
This type of concessional funding
received by domestic banks is a major
contributor towards improving the
project nancing terms to support
market deployment. With this type of
concessional nancing extended to
banks, the major difference is in the
loan pricing (interest rates), which
14 CoD - commercial operation date
has a signicant impact on the project
nancials and improves the viability
of the rooftop projects compared to
traditional grid power. Based on this
funding, PNB has released reasonable
nancing terms for lending loans
to rooftop projects. The loan tenor
extended by PNB under this scheme is 15
years with a moratorium period of 1 year
from rst disbursement or four months
from CoD
14
(whichever is earlier). The
scheme has been able to provide low-
cost nancing at an interest rate of one
year MCLR (i.e. 8.25%) with a spread of
30–50 bps based on the risk rating of the
borrowing rm.
ADB investment
DSM project @ 1 MW installation
49
While there has been signicant capacity
addition in the case of large-scale utility
solar power plants, rooftop solar is
also picking up pace in India with the
availability of innovative nancing
schemes and technology advancements,
thus improving the project economics.
To study the impact of innovative
nancing, especially the international
concessional funding available for
rooftop solar PV in India, nancial
assessments of the resulting tariff and
other leverage terms are compared.
This is done using a scenario analysis
approach, considering the loan
tenure and the interest rates with and
without concessional funding. The
impact assessment of concessional
funding shall be useful to assess the
resulting tariff that can support the
market sustainability of rooftop solar
projects compared to the conventional
grid tariffs. At the same time, faster
deployment of rooftop solar shall add to
environment protection and reducing
carbon emissions from traditional
conventional sources of power.
Assumption Unit Value
Installed Generation Capacity 100 kW
Capacity Utilisation Factor (CUF) 15%
Life of the system 15 years
Project Cost INR 54,000/ kW
Loan Repayment Period 10 years
Interest Rate with concessional funding (CTF) 8.5%
Interest Rate without concessional funding 10.5%
O&M Charges INR 600/kW
Annual O&M Expense escalation 5.72%
Annual Module performance degradation 0.5%
Demonstration and implementation potential
This section subjectively reviews certain
aspects of CTF funding, along the
dened pointers or impact indicators.
A neutral outlook is considered for
assessing the impact of providing CTF
nancing, blended with the funding for
rooftop solar projects in India received
from multilateral development banks.
The project funding usually comprises
debt and equity components with a
ratio of around 70:30, varying from
case to case. To evaluate the impact of
adding CTF nancing to the power tariff,
detailed nancial modelling has been
done, using a 100-kW rooftop solar PV
project as an example and considering
two different scenarios—with and
without CTF funds. CTF funds, in this
case, have been provided at the most
concessional rates (as explained in Case
I: With CTF funds) to provide viability
and low-cost nancing support to the
rooftop projects in India. The major
differential in the project nancing terms
using concessional funding is the rate of
interest and the tenure of loans extended
to the project developers. Since the debt
component in the nancing package of
a typical solar rooftop project is quite
high, project nancing terms play a
signicant role in reducing the project
tariffs and thus making the project more
viable. Also, since solar rooftop projects
are mainly installed for the purpose
of savings, reduced solar tariffs as
compared to the conventional grid tariffs
are a major driver. Thus, a scenario
analysis considering two possible cases is
done to compare the tariffs of a 100-kW
solar rooftop system.
Role of CTF
Key assumptions for rooftop solar PV system
PwC50
4.76
4.76
4.76
4.77
4.82
4.82
4.83
4.84
4.88
4.89
4.90
4.92
4.79
4.79
4.80
4.81
4.91
4.92
4.94
4.96
4.65
4.70
4.75
4.80
4.85
4.90
4.95
5.00
8 10 12 15
Rooftop tariffs with varying Interest Rate and Repayment Period
8.50% 9.00% 9.50% 8.75% 9.75%
Considering the above assumptions, the nancial impact on the projects with and
without concessional funding is summarised below:
The concessional terms offered by
blended funds from CTF and multilateral
development banks (World Bank and
ADB) to Indian banks (SBI and PNB)
have helped in bringing down the project
nancing cost by around 1.5–2% (i.e.
interest rate offered by SBI and PNB
under this line is MCLR + 20–50 bps),
which signicantly improved the project
viability, both for RESCOs and the end
consumers. CTF loans are offered with
a service charge of 0.25% per annum
on the disbursed and outstanding loan
balance and 40-year maturity, including
Case 1: With CTF funding (blended with funds from multilaterals)
a 10-year grace period, with principal
repayments at 2% for years 11–20 and at
4% for years 21–40. A management fee
of 0.45% of the total loan amount will be
applicable that will be capitalised from
the loan proceeds. These terms offered
by CTF, blended with the concessional
terms offered by World Bank and ADB
(comprising a 19-year loan tenure with
additional an 5 years as a grace period,
and interest rate as per the London
Inter-bank Offered Rate [LIBOR] for
12 months), have improved the project
nancing terms.
Based on the assumptions in Table 8,
the tariff was calculated as 5.08 INR/
kW. Since lending terms vary with
the riskiness of the project, a scenario
analysis is conducted considering the
rate of interest to vary from 8.5– 9.75%
along with a repayment tenure of 10–20
years. The graph below summarises
the impact on the resulting tariff
by varying the rate of interest and
repaymenttenure.
Rooftop tariffs with varying interest rate and repayment period
51
15 For future installation, the solar rooftop PV installation cost is considered as 54,000 INR/kWp and a debt of 70% is assumed.
4.94
4.96
4.97
5.00
5.00
5.03
5.05
5.08
5.07
5.10
5.12
5.16
5.13
5.17
5.20
5.25
5.20
5.24
5.28
5.33
4.70
4.80
4.90
5.00
5.10
5.20
5.30
5.40
8 10 12 15
Rooftop tariffs with varying Interest Rate and Repayment Period
10.00% 10.50% 11.00% 11.50% 12.00%
Capacity Addition with Clean Technology Funds in WB and ADB program
World Bank Program Sep-21 Asian Development Bank Dec-22
SBI- Current Installation Status as of
June 2018
PNB- Current Installation Status as of
June 2018
Projects Sanctioned
(MW)
Capital Used
($ Mn)
Projects Sanctioned
(MW)
Capital Used ($
Mn)
575 356 104.59 63.86
Possible Installations
(MW)
Capital
Available ($
Mn)
Possible Installations
(MW)
Capital Available
($ Mn)
400-450 269 700-750 436.14
Total Rooftop Capacity Addition 1700-1800 MW
Rooftop tariffs with non-CTF financing terms
Capacity addition with CTF and multilateral funds
Case 2: Without concessional funding support
Considering the most likely scenario
of 11% interest rate and same tenure
of 15 years, a base tariff of 5.23 INR/
kWh is discovered (levelised for 25
years). However, considering varied
risks in different projects and differences
in lending terms, a scenario analysis
is conducted to compare the results.
The graph below presents the tariffs
after varying the rate of interest and
repayment tenure. It can be clearly seen
that by varying the rate of interest and
keeping the same repayment tenure, the
resulting tariff is higher than the one
discussed above.
Thus, with the decrease in interest rates,
the tariffs are improved to a certain
extent, thus making the projects more
viable. Hence, the contribution from
CTF and other multilateral development
banks who are extending line of credit
at concessional rates to domestic
banks is considered as a major factor
for increasing the scale-up of rooftop
projects. With this, many independent
power producers (IPPs) have started
showing interest in building a large
portfolio of rooftop solar projects,
thereby increasing the deployment
oftherooftop market in the country.
An analysis of the potential for rooftop
installations with the available funds
reveals that more than 1 GW solar
rooftop capacity addition can be
targeted in the given duration of the
twoprogrammes.
15
Based on the challenges faced by
the Indian rooftop market, including
the high cost of nancing and high
credit rating risk of consumers, CTF
contribution/support to domestic banks
is quite a signicant factor in increasing
the deployment of rooftop solar PV in
India. Support to domestic banks by
providing concessional funding has
inuenced market growth by reviving
the interest of developers in the
deployment of large-scale projects. CTF
has increased the market momentum for
rooftop projects by addressing the major
roadblock of project nancing.
PwC52
Stage 1: Business development related
activities in rooftop solar creates more
jobs due to the small size of individual
projects and the necessity to reach out
to a larger consumer base. Around 1.53
job-years are created per MW.
Stage 2: The design and construction
phase is considered a single phase as the
size of individual installations is quite
small and hence, a single team oversees
construction and commissioning. Thus,
approximately 8.85 job-years per MW
can be estimated, with most of them
requiring skilled (72%) and semi-skilled
(20%) manpower.
Stage 3: The estimated job creation
in the construction and pre-
commissioning phase is around
13.84job-years per MW, where
additional construction workers are
required to undertake construction
activities, outsourced either to
contractors or through independent
construction workers.
Stage 4: O&M activities engage additional
workers, especially in the RESCO model,
where a dedicated team is employed
for regular cleaning and maintenance-
relatedwork. Job employment estimated
in thecase of rooftop solar is around
0.50job-years per MW.
Thus, with the above job opportunities in solar rooftop, funds from CTF and
multilaterals can support the installation of 1,911 MW (refer to Table 9) of solar
rooftop projects. The jobs created in this stage of the value chain are calculated below.
16 http://ceew.in/pdf/CEEW%20NRDC%20-%20Greening%20India’s%20Workforce%20report%2020Jun17.pdf
Rooftop Execution Stage Estimated Jobs Job-year/MW
Business Development 2924 1.53
Design and Construction 16913 8.85
Construction and Pre-Commissioning 26449 13.84
Operation and Maintenance 956 0.5
Job opportunities with CTF funding
Transformative: Potential GHG emissions savings
Development impact: Socioeconomic benet
PwC has projected the rooftop
installation of projects in India with CTF
money (see table on previous page).
The projections are made considering
the available funds and the sanctioned
capacity. Considering the estimated
capacity of around 1,911 MW that can
be deployed, it is estimated that GHG
emissions of around 17,57,737 tonnes
of CO2 can be saved over the 25-year
lifetime of the rooftop solar PV withCTF
support.
The impact of rooftop solar projects
is not limited to the environment in
terms of reduction in GHG, but can be
extended to socioeconomic benets.
Hence, the impact of large-scale rooftop
solar deployment in the country will be
on job creation. Rooftop solar is more
labour-intensive than other ground
mount solar and wind. Rooftop solar
(based on a survey conducted by the
Council on Energy, Environment and
Water [CEEW]) provides 24.72 job-years
per MW in comparison to 3.45
16
job-
years per MW for ground mount solar.
Analysing the job creation across the
complete value chain shows increased
job prospects in rooftop compared to
ground mount solar.
This estimate assumes a capacity
of 1,911 MW of rooftop solar PV
installation operating at a capacity
utilisation factor of 15%, displacing an
equivalent of around 2,511 GWh per year
of ‘thermal-based’ power. A weighted
average emissions factor of 700 t/GWh
is assumed that accounts for decreasing
emissions intensity associated with high
renewable energy penetration rates.
53
FY19 FY20 FY21 FY22
Government targets 16 23 31 40
Yearly capacity addition 6 7 8 9
Estimated cost (billion USD) 4.91 5.15 5.30 5.37
Optimistic scenario 40% 50% 60% 70%
Cumulative capacity 3.46 6.96 11.76 18.06
Yearly capacity addition 2.4 3.5 4.8 6.3
Estimated cost (billion USD) 1.96 2.58 3.18 3.76
Most likely scenario 30% 40% 50% 60%
Cumulative capacity 2.86 5.66 9.66 15.06
Yearly capacity addition 1.8 2.8 4 5.4
Estimated cost (billion USD) 1.47 2.06 2.65 3.22
Pessimistic scenario 20% 30% 40% 50%
Cumulative capacity 2.26 4.36 7.56 12.06
Yearly capacity addition 1.2 2.1 3.2 4.5
Estimated cost (billion USD) 0.98 1.55 2.12 2.68
Rooftop solar projections (GW)
Looking ahead
With the advancements in PV
technology, the cost of rooftop solar PV
systems has declined signicantly and
become economically viable in various
segments. In some markets, rooftop
systems are even cheaper than the
conventional sources of energy, yet the
on-ground implementation is far behind
the envisaged target to achieve 40 GW
by 2022. Apart from pricing, other key
drivers for rooftop solar deployment
in the country are the targets for CO2
reductions and compliance with RPOs
for those entities who are obligated to
meet a certain part of their electricity
consumption from renewable resources.
Thus, three scenarios—optimistic, most
likely and pessimistic—are considered to
project the possible growth in the rooftop
sector and the possible capital investment
required to support the growth.
The optimistic scenario denes the
scenario where concessional fundings
and other multilateral lines of credit
continue to support domestic banks
and in turn optimise the interest rates.
These additional funding sources shall
eliminate/reduce the biggest challenge
to project nancing in the case of
rooftop solar PV projects in India.
The assumption made in such a case
is that with reduced interest rates, an
improved percentage of rooftop solar
PV can be deployed (around 40% of
the yearly capacity addition projections
and increasing the penetration by 10%
each year). The cumulative capacity in
this case represents the total capacity
commissioned as on March 2018 and
the additional yearly capacity that
canbecaptured.
The most likely scenario, on the other
hand, represents a situation of business-
as-usual, where the rooftop deployment
continues with the prevalent market
interest rates @ 10–11% added through
subsidised interest rates available
from the current CTF and multilateral
support. In this scenario, the deployment
is limited with the available concessions;
hence, penetration of 30% of the
cumulative target capacity is assumed.
The growth, however, is considered at
the same 10% level. Yearly projections
in this scenario represent 30% of the
government planned yearly targets and a
subsequent 10% addition each year.
The pessimistic scenario represents a
situation of reduced/slow rooftop solar
PV deployment with the non-availability
of any concessional funding support
or any investment from multilaterals
to support rooftop deployment. The
assumption in this case is mainly the
deployment of rooftop solar by relying
on the domestic market and domestic
funding sources where the cost of capital
is high. In this scenario, an assumption
of 20% deployment is assumed and
projected at a growth rate of 10%
annually. Yearly capacity addition in
this scenario is 20% of the government
planned yearly targets in FY19 and a
10% increase in consecutive years. The
cumulative targets represent the total of
current rooftop capacity and the possible
yearly additions in this scenario.
The projections considered are presented below:
PwC
54
Thus, with the above projections, the
total debt and equity requirement in
each year is estimated assuming a
reduction of 10% in the rooftop system
cost each year (base year - FY 19, rooftop
cost considered is 54,000 INR/kWp).
However, to achieve the projected
targets, there is a strong need for
concessional funds or international line
of credit to support deployment. The
market for solar rooftop has yet not
reached a maturity phase to survive on
domestic funds. With the grid tariffs
also getting reduced, the rooftop tariffs
need the strong support of concessional
funds to complete with the existing grid
tariffs. Domestic loans, as compared to
concessional funds, are quite expensive
and that makes rooftop projects unviable
for consumers. Thus, the rooftop PV
market needs more scale and experience
to survive on domesticlending terms
and become a self-sustained sector.
Hence, concessional funds need to focus
into two broad categories:
•
Investment support
• Advisory support
The most important need in the rooftop
sector is investment support through
concessional funding sources (in terms
of debt sources and/or private equity
sources) as the market for rooftop,
compared to other markets like large-
scale utility solar, is not mature enough to
achieve viability without the availability
of concessional funds. Domestic loans
increase project cost, which in turn
increases tariffs. Rooftop projects are
mainly installed under a savings model;
hence, tariffs needs to be competitive
compared to conventional grid tariffs
to increase uptake. Thus, concessional
funding, at this point, is key to scale up
the rooftop sector in India. To achieve the
projected capacity, concessional funding
will play a major role.
Thus, estimating the debt and equity
investments will support the investment
need/opportunity in the country for
deploying rooftop solar. The debt to
equity ratio is assumed to be constant at
70:30, following the project nancing
norms of IREDA and other banks like
SBI, PNB and Yes Bank for all customers,
including customers with a low credit
rating. Thus, to achieve the yearly
capacity additions for rooftop solar PV,
the total investment and subsequent debt
and equity requirement in each scenario
are projected in the graphs below.
Assuming the above targets and different scenarios of possible rooftop deployment in
the country, the total investments that shall be required are projected below. The system
costs are assumed to be declining by 10% in the initial years until 2022 and later on, the
system cost is assumed as constant. The gures below show the cumulative investment
that will be required if the above projected targets are to be achieved.
Investment portfolio for rooftop solar
1.37
1.80
2.23
2.63
1.03
1.44
1.86
2.25
0.69
1.08
1.48
1.88
0.59
0.77
0.954
1.127
0.44
0.62
0.80
0.97
0.29
0.46
0.64
0.81
0.00
0.25
0.50
0.75
1.00
1.25
1.50
1.75
2.00
2.25
2.50
2.75
3.00
FY 19 FY 20 FY 21 FY 22
Investment (billion USD)
Y-o-Y investment (billion USD)
Debt optimistic Debt most likely Debt pessimistic
Equity optimistic Equity most likely Equity pessimistic
Debt
Equity
55
Looking at the above investment
requirements and investor interest in
the Indian rooftop sector due to the
government’s strong vision, various
innovative (international) nancing
instruments have been tried and tested
to drive investments in the sector by
addressing the debt nancing barriers
and the equity risks of developers.
The current sources of debt funding
include (refer to Figure 45).
1. Domestic sources: Commercial
banks, NBFCs, insurance companies
and capital markets
2. Foreign sources: Financial
institutions, pension funds, charitable
institutions, multilateral/bilateral
agencies and international banks
The sources of equity funding mainly
include funding from the parent
company where equity investments
comprise funds raised from pension
funds, promoter equity, IPO and private
equity. This type of foreign concessional
funding is supporting the growth of
the rooftop solar market; however,
to reach the maturity phase, there is
a strong need for continuity of these
funding supports until the market is
self-sustained, as in the case of the
USandGermany.
Rooftop solar projects require a
constant revenue stream in various
stages and for smooth construction.
The project construction life cycle
from the pre-construction stage to the
completion stage requires funds for
developers to ensure timely delivery of
the project. Hence, the availability of
concessional funds at each stage is an
incentivetostakeholders:
Feasibility stage
This is the rst step for project
development. If concessional funding is
infused at this stage, then it accelerates
the overall planning, construction and
implementation process of the project
with the availability of subsidised
loans/funds incentivising developers
to aggregate more projects. Developers
will need to infuse lesser equity or will
get access to loans at nominal interest
rates, which effectively improves tariffs
and hence makes projects more viable.
With the availability of subsidised loans,
the resulting tariff is also reduced,
thus decreasing the nancial risks
involvedinthe project.
Construction stage
Concessional funding, infused in the
construction phase of the project,
impacts the overall cost of the project.
With funds available at a subsidised
rate, the construction can be faster.
The developer will need to infuse the
equity at the initial stage and the initial
lending rate will be higher compared
to a subsidised loan provided at the
feasibility stage.
2.8
5.0
7.6
10.5
11.2
14.4
16.9
19.2
21.4
24.2
26.4
28.8
2.3
4.1
6.3
8.8
9.6
12.2
14.4
16.4
18.3
20.6
22.6
24.7
1.8
3.1
4.9
7.0
4.6
7.3
8.1
8.6
9.2
10.7
11.1
12.0
12.81
16.58
20.11
23.35
26.86
30.77
35.35
39.81
44.11
48.26
52.39
56.84
0.0
10.0
20.0
30.0
40.0
50.0
60.0
2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030
Investment (billion USD)
Optimistic (billion USD) Most Likely (billion USD) Pessimistic (billion USD) Targets (billion USD)
Cumulative Investment (billion USD)
Execution stage
This is the third stage of the project
life cycle when the construction is
completed and the rooftop plant is ready
for operation. Concessional funding at
this stage will support the developer
in improving project economics and
offering concessional rates for the
rooftop systems.
The rooftop market, being quite
nascent, based on the uptake of just 1.2
GW compared to 21.8 GW large-scale
utility solar, requires support in terms
of concessional funding, in addition to
advisory support in the form of capacity
building and training programmes for
the stakeholders. Concessional funds
shall initially support the market growth,
until the market has reached a self-
sustained phase where domestic funding
makes the projects viable for both
consumers as well as developers.
Another important focus of concessional
funds can be advisory support,
to bridge the gap amongst various
stakeholders involved in the deployment
of rooftop solar PV. Hence, a major
contribution in terms of capacity
building of stakeholders—namely
distribution utilities, SNAs and banks/
nancial institutions—is required. At
the same time, Central agencies like the
MNRE and Solar Energy Corporation of
India (SECI) require capacity building to
support the scale up the plan for rooftop
solar. Some of the activities that need to
be covered under the capacity-building
activities for these stakeholders are:
1. Distribution utilities: In order to
penetrate rooftop solar PV at a
fast pace, there is a strong need to
support the distribution utilities in
activitiesthat involve:
A. Standardisation of rooftop
application formats (dening
processing time for grant
connectivity approvals) so
as to allow fast deployment
ofthesystems.
Cumulative investment to achieve projected rooftop solar growth
PwC56
2. SNAs/regulators: Another important
stakeholder where handholding/
capacity building is required is the
SNAs or state regulators. The focus
areas for them include:
A. Capacity building/training
programmes – training on efcient
demand aggregation in the respective
states, skill development training
programmes for the ofcials,
learnings on new and feasible
business models for rooftop
deployment, support in enabling
market design for allowing larger
rooftop penetration;
B. Study tours to learn from successful
international programmes;
C. Efcient methods for rooftop vendor
empanelment based on technical
experience of the vendors.
3. Banks/nancial institutions: Banks
are a very important link in the solar
rooftop value chain. Though with the
availability of concessional funding
and international lines of credit
at concessional rates, the biggest
challenge of project nancing in
solar rooftop is nding a solution.
However, beyond availability of funds
at concessional rates, there needs to
be an increased focus on the capacity-
building activities of banks. Some of
the areas that need attention include:
A. Training sessions for ofcials to develop
a simplied loan appraisal process;
B. Identication of new and innovative
lending and insurance products;
C. Empanelment of lenders’ engineers
to make the due diligence process
more efcient.
4. MNRE: The ministry is the main arm
of the renewable energy programme.
Hence, there is a strong need to provide
advisory support to the ministry to
enable it to achieve the 2022 target of
175 GW. Considering rooftop solar, there
should be focus on capacity-building
activities in order to support the MNRE
in achieving the following goals:
A. Creation of a common platform to
enable all stakeholders (developers,
EPCs, nancial institutions) to
interact and share the challenges
faced in the execution of the
current programmes/schemes. The
platform will enable stakeholders as
well as the MNRE to support large-
scale deployment by considering
a reasonable solution to the
challenges identied. It will provide
a common platform to share
successful examples and hence
support the implementation scale.
B. Strong need to design a scheme
to incentivise distribution utilities
for customer loss due to rooftop
and accommodate the variability
of small-scale rooftop solar PV
systems into the grid. DISCOMs
have been struggling to uptake
this programme; hence, an
incentive scheme is the most
important need in order to
captureDISCOMinterest.
C. Another area of focus is introducing
mandates for new buildings
above 500 sq yd for rooftop solar
installation to support large-scale
deployment in residential areas.
5. SECI: It is another important link in
the Central Government to support
the large-scale implementation
of the rooftop programme. SECI’s
roleincludes:
A. Create a market for deploying
rooftop solar PV in the country.
B. Bring government establishments
on board to support the
implementation of the
projectedtargets.
Hence, funding sources are required
to support the above stakeholder
activities through customised
capacitybuildingprogrammes.
Currently, the various multi-/bilateral
agencies investing in the Indian solar
rooftop market are focusing on TA
programmes for capacity building
of various stakeholders. The World
Bank (GEF) and ADB have already
committed 23 million USD and 5
million USD for capacity building of the
respective commercial banks and other
stakeholders supporting the rooftop
deployment. Other capacity-building
programmes have been launched by
KfW and other development banks.
Hence, along with the investment
activities, these capacity-building
activities play a signicant role in the
increased deployment of rooftop solar
PV inthecountry.
Thus, concessional funding support
in the form of debt or equity and
capacity building will be required in
order to deploy rooftop solar PV in the
country. Lack of concessional funds
might increase the project nancing
cost, whichmight in turn disrupt
market growth and slow down rooftop
penetration inthecountry.
B. With the technological
advancements, there arises a
strong need to conduct technical
skill development activities for
theDISCOM team.
C. Since solar rooftop comes
with its challenges of variable
generation, there is a need to
ensure efcient methods of demand
aggregation to meet the demand
with larger systems in place of
standalonesystems.
D. To support the banks/nancial
institutions in ensuring the
credibility of the projects, there
needs to be a focus on supporting
DISCOMs in standardisation of
PPA that should include deemed
generation, right of way, etc.
E. To gain experience from
successful rooftop programmes
in international markets, study
tours need to conducted for
DISCOMofcials.
F. To successfully co-ordinate the
power requirements of consumers, a
strong link between generation and
transmission needs to be ensured;
hence, empowerment of Area Load
Dispatch Centre (ALDC) needs
focused attention.
G. With the evolving scale and special
technology, training/capacity-
building operations need to be
conducted for development/testing/
piloting of business models to
accommodate electric vehicle-energy
storage-rooftop.
H. Lastly, to manage the most
important challenge of small-scale
rooftop projects, technical expertise
to be provide for grid integration of
the rooftop system based on some
international experiences.
57
Appendix: Stakeholder
consultations – key messages
During the study, the major stakeholders
responsible for rooftop deployment in
the country were consulted. Various
banks/nancial institutions and
rooftop developers were approached
to understand the growth expected in
rooftop solar and also the impact of
concessional funding like CTF on the
rooftop penetration scale.
Banks providing nance to the rooftop
sector were approached to understand
the need for concessional funding in
order to improve the project nancing
terms in the case of small-scale
rooftop solar projects. CTF has been
one of the sources to improve project
nancing; hence, to compare the
difference, both banks (receiving CTF
funds and banks with no CTF funding
line)wereconsulted.
Developers, mainly large-scale
aggregators, were approached to
compare the difference in installation/
nancing terms with access to lines of
credit from banks. Since the current lines
of credit majorly support the aggregation
model, developers were consulted to
understand the impact of this evolving
business model and the subsequent
growth foreseen with this model.
Banks/nancial institutions
PwC interviewed various banks and
nancial institutions from the government
and private sector. Of the total banks and
nancial institutions interviewed, 40% are
from the private sector and 60% from the
government sector.
Methodology
PwC prepared a questionnaire that was
discussed with the relevant stakeholders.
The questionnaire focused on including
the banks’ view on the rooftop solar
market potential, covering the current
status and future expectations to support
the deployment of rooftop PV to achieve
the 40-GW target. Since the focus of
the discussion was to understand the
challenges faced by banks/nancial
institutions in supporting the rooftop PV
market, the team also tried to gather the
banks’ views on concessional funding
and the role played by these institutions
in supporting the scale-up plan.
The team tried to conduct these
consultations in person; however, a few
of the discussions were conducted over
the telephone based on the availability
of the stakeholders. A summary of the
discussions held with the banks and
nancial institutions supporting the
solar rooftop programme in India is
presentedbelow.
PwC58
Solar rooftop developers
Methodology
PwC prepared a questionnaire asking
relevant questions to stakeholders related
to the rooftop solar sector in India. The
questionnaire covered their areas of
interest and views on future growth as well
as the challenges faced by developers in
the scale-up of the rooftop portfolio. The
consultations were conducted in person to
gain insights from the respective experts
in the rm and understand the company’s
vision towards rooftop PV growth.
Discussion points
PwC consulted various developers,
most of whom highlighted a similar set
of challenges. The biggest challenge
includes the non-standardisation of
PPAs, which increases the risk of the
project and, in turn, makes project
nancing a challenge. The availability of
CTF funds (concessional funds) to banks
has brought in signicant momentum
by reducing the interest rates for rooftop
projects; however, the developers also
perceive long-term availability of these
Discussion points
All the banks and nancial institutions
consulted have a more than 40% share of
the solar market, out of which the share
of the rooftop solar market is at least 5%.
Traditionally, banks charge an interest of
10–11% to IPPs for rooftop developers.
These banks offer a higher interest rate
due to the absence of any concessional
funding support. However, other banks
with concessional funding support are
providing loans to developers at a rate
of 8.35–10.55% depending on their
credit ratings and risks in the proposed
projects. The portfolio of projects for
rooftop nancing for the interviewed
banks varies from 1 kW to 1 MW for a
single project.
Since the rooftop market is at quite
a nascent stage compared to large-
scale projects, banks face challenges
in successful disbursement of loans.
One of the biggest challenges faced by
most banks is the non-standardisation
of PPA terms (no inclusion of deemed
generation or right-of-way terms in
private PPAs) which makes the projects
quite risky and hence delays/increases
the nancing costs. Additionally, most
rooftop projects have an off-taker risk
as the buyer of electricity from plants is
mainly the end consumer whose credit
rating is a challenge in most situations.
The size of rooftop projects is another
big challenge for banks as the efforts
required in loan closure of large projects
are similar to those in small projects,
which actually increases the nancing
cost of smaller projects. This is why most
banks have preferred to nance projects
under the aggregation model, where a
portfolio of projects can be funded to
make the nancing terms viable. Most
banks, as per discussions conducted,
have no xed selection methodology and
rely on the portfolio presented by the
developers. However, certain banks that
have a limited presence in the country
PwC interviewed various leading private
developers of rooftop solar PV in India.
Since the scale of rooftop achieved in
India is around 1 GW, developers do not
have large portfolios. However, with the
increasing availability of low-cost nancing,
developers have a huge portfolio in pipeline.
funds as a challenge. Developers fear
that once the funds are exhausted, the
interest rates might increase, leading
to slow progress in the rooftop sector.
Since the scale of rooftop projects is
small, most developers prefer domestic
nancing and hence domestic nancing
will be costly if no concessional funding
support is extended.
Another challenge that affects the
scale-up of rooftop is the subsidy for
residential and government-owned
buildings. The residential sector has
huge potential, but delay in subsidy
affects the nancials of developers
and results in loss of interest among
residential customers. These delays do
not allow the sector to grow. Subsidies
also make project nancing a challenge,
as most of them are pre-conditioned
to the use of domestic modules, which
puts nancial institutions (international
funding agencies) under the risk of
generation/quality of projects. Thus, the
projects are on hold for a longer duration
and at the same time become costly. This
affects deployment in these sectors.
The aggregator model is the most
preferred model by developers as it
gives them a leverage to procure loans
at reasonable terms by presenting the
portfolio of projects and at the same time
provides a scale to developers which
helps them in procuring materials in
prefer to adopt a xed methodology of
aggregating projects (like specifying
location and size) so that resource cost in
conducting due diligence is saved.
Thus, our discussions reveal that banks
are largely interested in funding/
supporting the rooftop scale-up plans.
However, concessional funding should
be available for them to complete the
nancing terms of other banks and,
at the same time, challenges on PPA
standardisation, etc., should be resolved
at the Central level. Additionally, a few
banks also expressed a huge need for
capacity building/awareness creation
on solar rooftop projects among the
various stakeholders involved, including
DISCOMs, corporates, SMEs, individuals
and lenders. Lastly, banks are seeking
policy and regulatory support from the
government in terms of timely approvals
and clearances of rooftop projects.
bulk at reasonable rates. This model is
expected to lower the cost and make
the system viable for various categories
of consumers. Thus, most developers
nd concessional funding a major
contributor to the growth of rooftop PV
and also envision faster deployment in
the future with these funds available at
reasonablerates.
In terms of business model, most
developers are of the view that there is
no single business model that ts the
requirements of all customers in India,
unlike the case in Germany and the US.
Hence, business models in the Indian
rooftop market need to be customised
based on the needs of the end customers.
These models will keep evolving based
on the changing needs of customers.
Thus, developers also see huge potential
for growth in the rooftop sector.
However, the challenges like design
constraints due to limited roof size
and delays in net metering need to be
addressed to gain the required scale in
the rooftop PV sector, which shall evolve
with increased penetration.
59
About PwC
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About CTF
The $5.8 billion Clean Technology Fund (CTF) provides resources to scale up low carbon technologies
with significant potential for long-term greenhouse gas emissions savings. The fund is empowering
transformation in developing and emerging economies by providing resources to support innovative and
first-of-their-kind renewable energy, energy efficiency, and sustainable transport projects. The Dedicated
Private Sector Programs, created under the CTF to finance large-scale private sector projects with greater
speed and efficiency, have allocated a total of $467 million to geothermal power, mini-grids, energy
efficiency, solar PV, and early-stage renewable energy programs so far. Close to $5 billion in CTF funds
have been approved and are supporting the implementation of more than 100 projects and programs
expected to support total climate-smart investment of more than $50 billion.
About the authors
This point of view has been co-authored by Amit Kumar, Vibhash Garg, Vaibhav, Saachi Singla
and Prateek Girdhar.
Amit Kumar is a Partner and leads the Clean Energy practice for the firm. Vibhash, Vaibhav,
Saachi and Prateek are a part of the renewable energy team in the firm.
Contact us
Amit Kumar Saachi Singla
Partner Assistant Manager
amit2.kumar@pwc.com saachi.singla@pwc.com
Vibhash Garg Prateek Girdhar
Director Consultant
vibhash.garg@pwc.com prateek.girdhar@pwc.com
Vaibhav Singh
Associate Director
vaibhav.1@pwc.com