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India's $9 billion rooftop PV program faces multiple challenges

published: 2024-07-09 17:39

India is aggressively promoting rooftop PV installations and has introduced new subsidies to incentivize domestic manufacturers. However, this ambitious program is not a "panacea" and its implementation will face multiple constraints.

For a long time, the inconsistency of policies across Indian states, the financial woes of power distributors, as well as the limited disposable income of residents and the lack of rooftop space will be stumbling blocks for the promotion of PV applications. Although the Indian federal government has set an ambitious target of adding 30GW of new household rooftop PV by March 2027, the reality is that the annual new installed capacity has been less than 1GW, indicating that the target is quite difficult to achieve.

To encourage households to install PV systems, the government offers generous subsidies - a household can receive about US$938 for a 3kW system. However, the policy does not provide additional incentives for larger PV plants. In addition, the government has promised to provide free electricity, cheap loans, and allow households installing rooftop PV to sell their excess power at net metering tariffs. But these promises are difficult to implement because they are beyond the direct control of the federal government.

It is worth noting that the new subsidy program specifically calls for the use of locally made cells and modules in India, which will undoubtedly bring huge business opportunities for domestic cell manufacturers. However, this could also lead to a supply crunch, which in turn could push up the cost of PV panels. The few companies that manufacture cells in India will thus gain pricing power, which could ultimately be passed on to consumers, driving up the overall cost of rooftop PV.

In addition, high-income households are likely to be the main beneficiaries of this subsidy program due to affordability and roof space constraints. This will further exacerbate the loss-making position of distribution companies, which are already under financial pressure, and may lead to more obstacles in the net metering tariff adjustment and rooftop project approval process. At the same time, the high costs faced by installers in terms of customer acquisition and other potential uses of rooftop space still need to be properly addressed. As a result, while the Indian government's subsidy program may look attractive, it still faces many challenges and constraints in practice.


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