Policies and Regulations

Both central and state governments have launched various schemes to incentivise rooftop solar power in India. We provide an overview of the important policies to be considered for rooftop solar PV.

Central schemes

Several incentives are available for rooftop solar PV plants through the Jawaharlal Nehru National Solar Mission.

Accelerated Depreciation (AD)

Accelerated depreciation of 80% is available under the Income Tax act for rooftop solar PV systems. This can provide significant savings to a solar plant developer who is a taxable assesse and has sufficient profits against which the depreciation can be charged. This is illustrated in this table:

*Tax rate can vary for different assesses

MNRE Subsidy

The Ministry of New and Renewable Energy (MNRE) provides Central Financial Assistance through capital and/or interest subsidy (depending on the nature of the applicant). The summary of the subsidy scheme is provided in the table:

S. No.	Category	Maximum capacity	GOI Support
			System with battery backup	System without battery backup	Interest Subsidy
1	Individuals for all applications	1 kWp	Rs.51/watt or 30% of project cost whichever is less	Rs.30/watt or 30% of projectcost whichever is less	Soft loans @5% p.a.
2	Individuals for Irrigation, & community drinking water applications	5 kWp	Rs.51/watt or 30% of project cost whichever is less	Rs.30/watt or 30% of project cost whichever is less	Soft loans @5% p.a.
3	Non-commercial/ commercial/industrial applications	100 kWp	Rs.51/watt or 30% of project cost whichever is less	Rs.30/watt or 30% of project cost whichever is less	Soft loans @5% p.a.*
4	Non-commercial/ commercial/industrial mini-grids	250 kWp	Rs.90/watt or 30% of project cost whichever is less		Soft loans @5% p.a.*

*for commercial/ industrial entities either of capital or interest subsidy will be available

Note: 1 The benchmark cost for setting up a solar PV plant is Rs. 170/Wp (With battery providing 6 hours of autonomy) and Rs. 100 per Wp (without battery) i.e. if the actual project cost exceeds this amount then project cost will be deemed to be the benchmark cost for calculating the subsidy.

Note 2: Benchmark costs are for systems with 5-year warranty for all components (inverters, batteries, switchgear, etc.) other than PV modules which are warranted for 90% of output at end of year 10 and 80% at end of year 25. PV modules have to be made in India to avail subsidy.

Note 3: Capital subsidy is increased to 90% of benchmark cost for special category states (North Eastern states, Sikkim, Jammu & Kashmir, Himachal Pradesh, and Uttarakhand).

The subsidy calculation is illustrated in this table:

Please see here for more details on how both the subsidy and accelerated depreciation work together to reduce the cost of your rooftop solar system even further.

Renewable Energy Certificates (RECs)

Renewable Energy Certificates are an avenue to further monetise your rooftop solar PV plant. RECs are available for rooftop plants of 250 kW or greater capacity. Every 1 MWh (1,000 units) of energy generated is eligible for 1 REC. These RECs are traded on power exchanges, where they are sold to organisations that need to satisfy a Renewable Purchase Obligation (typically utilities).

Criteria

• The project should have a minimum generating capacity of 250 kW
• The power generated should not be sold to any distribution licensee at a preferential tariff
• Captive solar power generators should not be
  • Availing promotional wheeling charges
  • Availing promotional banking charges
  • Not receiving any exemption/waiver of electricity taxes or duties
  • Only grid-connected projects can avail RECs. Off-grid projects are not eligible
  • The solar project should be accredited with the State Nodal Agency 6 months prior to the date of commissioning of the project
  • The solar project should be registered with the Central Agency 3 months prior to the date of commissioning of the project
  • The solar generator has to apply to the Central Agency for the RECs based on electricity generated that is certified by the State Load Despatch Centre (SLDC) through a separate meter
  • Issued RECs can be traded only through power exchanges through a closed double-sided auction

Procedure

• The solar project should be accredited with the State Nodal Agency 6 months prior to the date of commissioning of the project
• The solar project should be registered with the Central Agency 3 months prior to the date of commissioning of the project
• The solar generator has to apply to the Central Agency for the RECs based on electricity generated that is certified by the State Load Despatch Centre (SLDC) through a separate meter
• Issued RECs can be traded only through power exchanges through a closed double-sided auction

Price of Solar RECs

The price of solar RECs has been fixed within a band of Rs. 9,300 (minimum) and Rs. 13,400 (maximum) per solar REC until FY 2016-17.

Risks associated with RECs

There are two risks associated with RECs in India

• Current market – The market for RECs exist only if RPOs are enforced. The track record of enforcement by most state governments is rather poor. As there is a minimum price at which RECs can be sold, the effect of poor demand is felt in the number of RECs sold: only about 15% of the solar RECs offered for sale in November 2013 found buyers
• Future price – The floor price has been set only till 2017. There is uncertainty on pricing beyond this period. Unless enforcement of RPOs improves we expect the price for solar RECs to be in the Rs. 1,500-3,900 range between 2017 and 2022

Further information on RECs can be found at the REC registration website.

State schemes

Several states in India have released solar policies that further incentivise rooftop solar. We provide a brief snapshot of a few state solar policies for rooftops.

Gujarat

Capacity addition targeted	25 MW
Consumer segment	80% Government; 20% Residential
Project Type	Rent-a-Roof
Incentives	5 MW rooftop programme on the PPP model in the capital which is now extended to about 5 more cities and towns Monthly incentive of Rs.3/kWh for the roof owner
Offtaker/Power purchaser	State Distribution Agency
Base requirement	Various sizes of SPV systems ranging from 500 KW, 100 KW, 50 KW, 20 KW, 10 KW, 5 KW, 1 KW and more

Karnataka

Capacity addition targeted	250 MW
Consumer segment	All buildings with rooftop space
Project Type	Rent-a-Roof
Incentives	Rs 3.40/KWh Net Metering Any other incentives available to rooftop systems
Offtaker/Power purchaser	State Distribution Agency
Base requirement	Developers should guarantee a minimum of 450 kWh a year for half kW systems and 900 kWh for 1 kW

Kerala

Capacity addition targeted	10 MW
Consumer segment	Residential only
Project Type	Owner owned
Incentives	30% Subsidy from MNRE + Rs.39000/system from the Government of Kerala
Offtaker/Power purchaser	Captive (home use)
Base requirement	Minimum system size of 1 kW

Rajasthan

Capacity addition targeted	50 MW
Consumer segment	All buildings with rooftop space
Project Type	Owner owned/Rent-a-Roof
Incentives	Tariff-based competitive bidding
Offtaker/Power purchaser	State Distribution Agency
Base requirement	Small solar power plants connected at 11 kV of a minimum of 1 MW

Tamil Nadu

Capacity addition targeted	350 MW
Consumer segment	Residential and Commercial
Project Type	Owner owned/Rent-a-Roof
Incentives	Rs. 2/kWh for first two years; Rs. 1/kWh for next two years; Rs. 0.5/kWh for subsequent two years Net metering 10,000 1 kW domestic systems eligible for Rs. 20,000 subsidy in addition to 30% MNRE subsidy
Offtaker/Power purchaser	Captive and State Distribution Agency

What is net metering?

Several state policies mention net metering. It refers to an incentivising model where excess power generated by the rooftop plant (such as power generated on weekends or national holidays) can be pumped into the grid, and the generator receives a credit for the number of units supplied to the grid against the number of units received from the grid i.e., it is as if the meter ran in reverse when power flowed from the rooftop plant into the grid. In its purest form it would be calculated like this:

Numbers are for illustration only

In some state policies the energy supplied to the grid is not directly credited against the number of units consumed from the grid. Instead, another tariff is used to calculate the credit for the energy supplied to the grid. This is illustrated in this calculation:

Numbers are for illustration only
Solar power supplied to the grid under net-metering may not qualify for RECs. For e.g., in Tamil Nadu such power is not eligible for RECs as it is deemed to qualify for the DISCOM’s RPO.

Net metering requires a net meter that can record both power consumed from, and supplied to, the grid.

It should be noted that without net metering, the excess power generated is still supplied to the grid. The generator doesn’t receive any benefit from doing so in the absence of a net metring policy.

Permissions

Typically, permissions are not required to set up rooftop installations with capacity <10 KW. If the capacity exceeds 10 KW, the main approval required is for the developer to get permission from the nearest substation.

Due to the issues of congestion in the grid infrastructure, some local restrictions could be in effect on the capacity of rooftop solar power plants that can be connected to the grid. For e.g., in Tamil Nadu grid connectivity to rooftop solar systems is restricted to 30% of the distribution transformer capacity on a first-come-first-served basis. To avoid any missteps in this regard we urge you to verify with local power distribution authorities if any such restrictions apply to you, irrespective of the size of solar plant you wish to connect to the grid.