Selling Unsubsidized Solar Energy For Indian Industrial Customers Become Big Growth Market

Unsubsidized Solar Market in India

While lower prices of ground mounted utility solar energy plant in India have made headlines for a long time, rooftop and distributed solar energy systems have not made much of an impact till now. However, with a growing ecosystem of suppliers and falling costs, rooftop solar energy prices are now starting to make a deep impact. It is possible to get long-term PPAs at INR 4.5-5/kWh these days by commercial and industrial customers from many large and strong companies such as Hero, Cleanmax, Renew etc.

This is a no-brainer decision as the prices supplied by Indian distribution utilities are generally between INR 7-12/kWh which means savings of as much as 50%. Given that many of these customers have a large energy cost component, this can significantly change the dynamics of their business by going solar. The key business hurdle that has prevented the growth of this market are power regulations which do not allow the easy transmission of power from solar energy sources.

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Many India states levy high transmission charges as well as cross-subsidy charges. Industrial and commercial customers have to pay a subsidy for residential customers receiving electricity at a lower price. This significantly inflates the price at which the power is delivered to customers. These charges can sometimes be as high as the generation cost making the economic proposition unviable. The other thing is the uncertainty as the states may suddenly raise these charges somewhere down the line which increases the risk.

However, in places where the government has exempted solar energy from these charges, the business case is irresistible. Karnataka which is one of India’s large industrial states situated in the southern part of India is seeing a massive boom of solar suppliers, building capacities to sell power to commercial and industrial customers in the state. The government has allowed zero charges on movement of solar electricity till March 2018 for the next 10 years. This has led to a frenzied building of capacities by players who are looking to beat the deadline. The economic case is compelling and many large industrial and commercial customers in the state have signed contracts with suppliers. It is being said that almost 500-600 MW of solar capacity will be built in the state in this segment alone. This is over and above the state and central government schemes which allocate capacities through the reverse bidding route for large plants.