India’s Rooftop Solar Subsidy to decrease from 30% to 15%

India is set to reduce the subsidy on rooftop solar systems to 15% from the 30% now. This is a sharp cut in capital subsidy by 50% and normally would draw howls of protest from the solar industry. But this has barely been noticed by anyone because the funding issues and regulatory hassles meant that this subsidy was mostly on paper. The subsidy can only be availed by MNRE empaneled vendors; and for the last one year even those vendors could not avail the subsidy as no funds were released to MNRE.

Around 300 MW of rooftop solar has been installed in the country till date, which is 1/10^th the size of the large scale utility ground installations in the country. While the large ground mounted installations have received large amounts of subsidy from both the state and central governments, distributed rooftop solar installations have got a step motherly treatment from the government. Also there has been little in the way on enabling regulations and policies such as net metering, open access etc. Most of the rooftop has come about through small government tenders and through grid parity economics.

Advantages of Rooftop Solar.

The 50% cut to rooftop installations does not make sense to me, unless the funds to MNRE are increased and other incentives such as gross net metering, ease in getting approvals etc. are granted. Solar equipment costs in India are one of the lowest in the world due to low labor costs and cheap BOS components. However to get the real benefit, the government should look at improving the approval times and getting cheap loans. Ease in getting funding for this sector could lead to a sharp increase in distributed rooftop solar capacity in the country. Some states like Tamil Nadu and Haryana have tried to push rooftop solar installations, but without the right kind of on the ground policies and regulations. As a result of which their plans have become a non-starter.

Haryana has recently made rooftop solar compulsory for all buildings with area greater than 500 sq. meters. But the cut in 30% subsidy by the center has thrown their plans haywire, as a lot of the customers will be reluctant to fund the high initial costs of solar installations. A better way would be to provide incentives in the form of stamp duty or property tax exemptions, rather than depend on the central subsidies which have been a failure for rooftop solar installations.