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renewable energy: Change in renewable energy mix gives rooftop solar projects steam

Rooftop solar projects are set to get a fillip with the introduction of the ‘distributed renewable energy’ segment in the latest renewable purchase obligations (RPO). This means that power distribution companies will have to mandatorily purchase renewable energy from rooftop solar projects among others included in the segment.

The government recently changed the mix of renewable energy sources for mandatory purchase by distribution companies and open-access consumers, while keeping the total obligation unchanged at 2022 levels. Renewable energy projects with a capacity of less than 10 MW installed by consumers under any arrangement will qualify for renewable purchase obligation from the distributed renewable energy segment.

Discoms have been apprehensive of signing power purchase agreements for rooftop solar projects and installing the required net metering systems fearing loss of revenue from their high-paying consumers, financial viability of such projects and problems in sourcing finance. The implementation of green open access rules has also shifted the market attention, leading to state power regulators prioritising it over rooftop solar approvals, according to industry experts. The provision for distributed renewable energy was added to give an impetus to the scheme, said an official who did not wish to be named.

“It will also make it easier for smaller energy developers to get involved, as they’ll have a better idea about the trajectory of installations in these schemes [rooftop solar and PM KUSUM],” said Gaurav Upadhyay, Energy Finance Specialist (South Asia), Institute for Energy Economics and Financial Analysis (IEEFA).

Hits and misses

The rooftop solar programme had missed its target, lagging mostly in the residential segment. The commercial and industrial segment has seen a better response even though government sees scope for small enterprises to grow more. To achieve a 40-GW rooftop solar target by 2022, the central government had launched two phases of the grid-connected rooftop and small solar power plants programme with incentives through central financial assistance. Despite the government’s efforts, by the end of 2022, only 8.1 GW of rooftop solar capacity had been installed, according to a joint report from JMK Research and IEEFA issued in August. This was about double the 4.4 GW capacity as on March 31, 2019.

The shortfall of around 80% in the target led the Ministry of new and Renewable Energy to extend the timeline of Phase-ll of the programme by more than three years to March 2026, the report said.

FY24 will see the largest installations of rooftop solar to date of about 4 GW, of which 50% has already been installed between April and July, the report added, quoting industry estimates.

In the first half of calendar year 2023, 872 MW of rooftop solar capacity was added which was 3.2% higher than the corresponding period last year, according to a report from Mercom India.

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