Rooftop solar in India has the growth potential, but it is still not growing fast enough. If we look at the targeted capacity and actual rooftop installed capacity data you will be able to understand what we mean to say. The data released by MNRE shows that the target for rooftop solar installation was 200MW by financial year 2016, followed by 4,800 MW the next year, and 5000 MW for FY 2018. However, if we look at the actual installed capacities stood at 982 MW as of Dec 2017.
“As we speak today, against this target we have set up around 16 GW of ground-mounted and 1 GW of rooftop solar. So if I can admit… our rooftop programme is not doing really well,” MNRE secretary Anand Kumar said on Jan. 19 at a workshop organised by trade body Confederation of Indian Industry in New Delhi, the Press Trust of India reported.
So, what is the problem?
According to industry players we interacted with, the main reason is that the policy currently is purely for industrial rooftop projects and they don’t have too many benefits for residential rooftop. While commercial and industrial rooftop projects are already economical without net metering, for residential rooftop solar to take off, such a policy is critical since homeowners don’t use much power during the day. Even those states that allow net metering have a cap on the amount of power that can be fed back into the state grid.
According to our analysis some of the key hindrance for wide scale adoption of rooftop solar for residential consumers is the exorbitant cost of installation of a rooftop system, lack of interest from large or serious players and lack of knowledge and guidance.
Though the cost of a PV system has come down the case is not the same for small rooftop systems that is the main requirement of residential customers. Although the residential PV market is likely to evolve substantially, the system cost reduction may seem very challenging today. Through this article we present 4 pathways to this goal that are plausible if significant and sustained technology and business-model innovations are realized.
Although there are various opportunities to reduce residential PV costs, we identify four key opportunities—market maturation, business model integration, product innovation, and economies of scale—and their potential impacts on PV system cost categories.
Currently large developers and EPC contractors interest is in ground mount and large rooftop solar installation that typically caters to the commercial and industrial consumers. While the small and residential market is served by small players. There has also been a rapidly evolving set of back office support, software, and other types of firms that serve this segment.
The high-volume installers typically have the purchasing power to negotiate lower module and component prices compared with lower-volume installers, especially when bulk purchasing modules and other components from suppliers. With increased PV market maturation, these pricing differentials could be significantly reduced through the development of a mature supply chain, distribution channels, and support services aimed at small, medium, and large companies. Between 2017 and 2022, the market matures such that small, medium, and large installers can procure modules and other components at or near the spot market prices. This will significantly reduces supply chain costs.
Business Model Integration
Currently, most solar companies in operate independently from roofing companies and homebuilders, and they often do not coordinate with these traditionally separate businesses. However, some solar companies have begun to collaborate with roofing companies and/or homebuilders to offer PV to prospective customers. For example, SunPower, a PV manufacturer and installer, currently partners with 10 of the 13 largest homebuilders in California to deploy PV on new construction. In addition, some roofing companies have begun to integrate PV into their product offerings and businesses more broadly. Business model integration is less common in the housing industry, but this market segment is quickly evolving. For example, Lennar—the second-largest U.S. housing company—deploys PV on its new homes via its subsidiary SunStreet.
Increased business model integration can offer cost savings over a PV-only approach, including lower customer-acquisition costs, labor time, and overhead expenses. For example, PV can be integrated into existing sales and marketing programs from roofing and housing companies, with reduced added costs. Similarly, overhead expenses and installation labor costs could be reduced by eliminating duplicate back office expenses and integrating installation crews.
Product innovation could take a variety of forms, such as reduced PV racking and mounting, preassembled PV, and low-cost PV roofing tiles. An integrated PV and roofing product, in particular, could yield significant cost savings, especially if the roof and PV system could be shipped and installed in unison. Although integrated products have low market share today, it is plausible that they could reach the mass market by 2022. For example, several companies have recently introduced or are developing integrated PV products. Product innovation along these lines could influence the labor, supply chain, and structural BOS cost categories.
However, there is a growing interest among homeowners in bundled PV systems that include dispatchable load, batteries, and electric vehicles. The bundled PV product offerings allow homeowners to increase PV self-consumption and realize greater value from PV generation by temporally shifting customer load under the PV production curve. Given the cost declines and the potential benefits of PV plus storage solutions, in future homebuilders and roofing companies are likely to expand their offerings beyond standalone PV systems to include storage as well. Early signs of this trend can be seen in the United States, with limited examples of battery manufacturers announcing partnerships with homebuilders to install batteries alongside PV on new construction.
Economies of Scale
Economies of scale are likely to be most accessible to the new housing market, because the cost of individual systems could be reduced by spreading fixed costs across multiple installations. Homebuilders often construct an entire subdivision (averaging 60 housing units), so a combined, or closely related homebuilder/PV installer could achieve cost savings by installing multiple PV systems simultaneously. For example, combining installations could reduce labor costs by requiring the work crew to go to a subdivision only once to complete multiple installations. The overall benefit of economies of scale varies by the quantity of PV systems installed in a particular area, but the key cost categories affected include labor, sales and marketing, and PII costs. Achieving economies of scale in the roof replacement market is more difficult because, with the exception of major storms, rarely does an entire neighborhood require roof replacement at the same time.