4 Major Advantages of RESCO Model in India- Definition, Benefits, Rooftop Tariffs

RESCO Model in India

India is targeting to achieve 100 GW power capacity through solar energy, out of which 40 GW is targeted to come through rooftop solar installations by 2022. Rooftop solar is believed to gain popularity in India since the country suffers from huge land problems as well as increasing commercial and industrial tariffs. However, the country has missed reaching its rooftop potential even after several government efforts and incentives.

The economics of installing a rooftop solar system in India is gradually improving with decreasing prices of solar panels. It is now cheaper to generate solar power from your rooftop installation, than commercial and industrial power and also less than the residential tariff in many states of the country. In order to further aid in financing, one of the models is the RESCO model. RESCO or Renewable Energy Service Company, would set up the solar power project and then monetize the energy produced.

The electricity tariffs under RESCO mode came down to INR 4.5 per kWh in Rajasthan and INR 3 per kWh in certain special category states, during the last year. This year, rooftop tariffs touched a record low of INR 1.58 per unit under RESCO model in Madhya Pradesh.

Here is the framework of the RESCO model as proposed by MNRE. According to MNRE, “RESCOS are expected to operate on a model wherein they will purchase the asset (solar panels/collectors) using long term funds, generate power, distribute it and collect revenues from their customers.”

Also, read Will Delhi Reach Its Solar Target With A New Rooftop Solar Program

 Image Source: MNRE

The RESCO model is expected to be the most successful way to expand solar installations in India. Here are the four main advantages of the RESCO model:

i) RESCO model is less capital intensive than the Capex model, wherein the owner has to pay the entire upfront cost of components and installation. In contrast, in a RESCO model the entire system is owned by the developer and rooftop owners just must pay a monthly pre-determined tariff based on their consumption of electricity.

ii) In the RESCO model, the responsibility of operations and maintenance is entirely on the developer.

iii) Installations under the RESCO model enjoys more central and state government agencies’ support in the form of subsidies.

iv) There is better monitoring of load and consumption which help consumers to manage their energy consumption.

The Renewable Energy Service Company model or RESCO model as it is popularly known as is expected to generate an aggregated demand of 40 MW. The aggregation program is expected to benefit consumers like residential, schools, hospitals, and municipal segments. These customers can expect facilitation of easy financing among other potential barriers, as a possible outcome of this program.