India's solar power subsidies for homes face scepticism

Solar panels are installed on the rooftops of houses in Modhera in the western state of Gujarat, India, October 19, 2022. REUTERS/Sunil Kataria

Solar panels are installed on the rooftops of houses in Modhera in the western state of Gujarat, India, October 19, 2022. REUTERS/Sunil Kataria

What’s the context?

With new subsidies for homeowners, India aims to boost solar power but critics say widespread uptake is still unlikely

  • New subsidy scheme to encourage people to go solar
  • 10 million homes targeted for solar panels
  • Green skills, distribution companies pose challenges

NEW DELHI - Lakshmi Narayan was one of the first to see the light: in 2020 the engineer put solar panels on his roof in India's Bhopal city, becoming a clean energy pioneer because of his desire to help his country move away from planet-heating fossil fuels. 

"I understand the importance of renewable energy and thought that everyone should adopt it," said Narayan, 60, whose action inspired many others to do the same in the capital of Madhya Pradesh state in central India. 

Now, a new government scheme - unveiled before voting began in nationwide elections in April - aims to encourage more people to install solar panels on their roofs as part of India's commitment to triple renewable capacity by 2030.

The new programme, launched in February, provides 75 billion rupees ($9 billion) in subsidies to install grid-connected rooftop solar systems on around 10 million homes, allowing consumers to reduce their electricity bills when the sun shines and sell extra units to the grid to earn some money.

It is expected to create 30 gigawatts (GW) of solar capacity in homes, leading to a reduction of 720 million tonnes of CO2 equivalent planet-heating emissions over the 25-year lifespan of the rooftop systems.  

"I want three things. Every household's power bill should be zero; we should sell surplus electricity and earn money; and I want to make India self-reliant in the energy sector as we transition to the era of electric vehicles," Prime Minister Narendra Modi said in a televised interview in late April.

The process, which was previously complicated and fragmented, has been simplified with the creation of a one-stop online portal to smooth applications and facilitate installations. Subsidies are deposited directly into people's bank accounts.

India overtook Japan to become the third-largest solar power generator in 2023, providing 5.9% of global growth in solar, a report by think tank Ember said on May 8.

But Ember noted that wind, solar and other low-carbon sources are not yet growing fast enough to meet India's rising electricity demand.   

The new rooftop solar programme is meant to boost that growth but Narayan's experience offers a cautionary tale.

He says the new online portal will provide answers to a lot of the bureaucratic headaches that used to bedevil the process but, in his experience, the bigger challenge is getting the electricity distribution companies, or DISCOMs, on board.

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A December 2023 study by the Centre for Science and Environment (CSE), a Delhi-based think tank, said DISCOMs were supposed to provide seamless access and connectivity for rooftop solar systems to the national grid but that this was sometimes "in direct conflict with business interests of the companies”.

Narayan said that although he saved up 250,000 rupees  ($2,996) in electricity bills over three years thanks to his 6 kilowatt (KW) solar system, selling excess electricity to the grid proved to be problematic with debt-ridden DISCOMs proving ineffective partners. 

"The electricity distribution company charges me 8 rupees for each unit that I consume from the grid, but for the surplus solar electricity that I sell back to the grid, they pay me 1.5 rupees per unit. How is that fair?" 

And he said that the distribution company added a fixed charge of 500 rupees to his monthly bill after he installed the panels. 

"They said that this is the minimum amount we will charge you even if your bill is zero," he said, adding that he got no answer when he enquired about the reason for the new tariff. 

Distribution challenges, lack of skills

The pledge to cut electricity bills by boosting the solar power sector was a key election promise from Modi's ruling Bharatiya Janata Party and reflects India's long-term commitment to boost renewables.

In 2015, India promised to install 40 GW of rooftop solar capacity by 2022 but progress has been slow. By the end of 2023, it had only installed 11 GW, including 3 GW in homes with the rest in commercial or industrial properties. 

That original commitment has now been revised to 100 GW of rooftop solar installations by 2026, 40 GW of which would come from the residential sector alone.

Energy experts say India's solar drive is hampered by fears of DISCOMs losing income, a shortage of skilled workers to make, install and service solar panels, and the proliferation of substandard products.

Danish Ali, who has installed a 4 KW solar system on his roof in Lucknow in northern India, said another problem arose from the fact that the grid-connected solar systems cannot deliver power during outages unless they have a separate battery to operate them.

"In areas where there are long power cuts, grid-connected systems will not work because they do not provide any power back-up," the 50-year-old said.

Ali has to endure up to two hours of power outages a few times a week during peak summer months when temperatures regularly rise above 40 degrees Celsius (104 Fahrenheit).

He said that adding a battery to the grid-connected system could solve the problem, but the government subsidy does not cover the installation of such hybrid systems.

Shreya Mishra, CEO of Mumbai-based SolarSquare Energy, which installs solar panels and is one of India’s largest rooftop solar companies, said the industry could be on the brink of a boom; in 2023, 150,000 rooftop systems were installed and there are plans to target 2.5 million houses this year, she said.

"The programme has turned rooftop solar into a dinner table conversation that has turbocharged the consumer interest," she said.

But more training is needed for workers in these new green jobs and domestic manufacture of solar panels must also be ramped up, she added.

The government says the new solar programme will create around 1.7 million direct jobs across various sectors, including manufacturing, logistics, sales, installation, operation, maintenance, and other services.

An expert with a solar consultancy, who did not wish to be named, said that the relatively limited growth of home solar systems had already caused friction with DISCOMs.

"Imagine millions of homes being hooked up to the grid and injecting their excess electricity in a system that is already facing so many technical losses," the expert said, referring to losses caused by, for example, damage to transmission lines or electricity theft.

For Narayan, solving distribution issues will be central to encouraging more people to switch to solar and install panels on their rooftops.

"If the government can enable people to truly earn some money, not for show but justified money, with these rooftop systems, it will be a hit among customers. Who would not want it?" he said.

($1 = 83.4370 Indian rupees)

(Reporting by Bhasker Tripathi @BhaskerTripathi; Editing by Clar Ni Chonghaile.)

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