Rooftop Solar - Lease Model - India Renewable Energy Consulting

It is no secret that despite the best efforts by the government, the rooftop solar PV segment in India has not really kicked off. The reason for this has been attributed to the lack of availability of net metering – a mechanism through which the excess electricity that is generated by a rooftop installation can be effectively measured and fed back into the grid to generate additional revenue thereby improving returns.

More than the lack of availability of the net metering, it is likely that the cost of small scale rooftop solar PV installations – about Rs. 1.5 lakhs to 1.8 lakhs per kW is the likely cause for the scenario. This coupled with the fact that there aren’t many specialist rooftop solar installers in the country who offer specialized as well as value added services in the field of rooftop solar installations has stunted the segment. In a study conducted by NREL, it has been revealed that a significant portion of new rooftop installations in the US, particularly California, have been made possible through the leasing model wherein the customers don’t actually own the solar PV system, but merely provide their rooftops for installation while leasing the equipment required for electricity generation. This helps the customer enjoy the low upfront costs while also resulting in immediate savings.

Due to the lower upfront costs, this leasing model would lead to the adoption of solar PV in less affluent neighbourhoods which aplenty in India. It is rather surprising that no one has tapped this potential considering the fact that renewable energy is an exotic proposition for many neighbourhoods in the country. Some of the other findings in the research conducted by NREL include

Third-party leasing usually eliminates the need for home-equity-style financing and, thus, the need for significant equity in the home. Without the hurdle of financing, more people can adopt solar.
Along with the lower income threshold, it was found that there was a surge in solar leasing in neighborhoods with younger families.
In the Los Angeles and Orange county markets, customer-owned PV was five times more prevalent than third-party owned in 2009. In 2010, the ratio had dropped to 2 to 1. And for the first quarter of 2011, the ratio was almost even indicating the obvious benefits and willingness to adopt solar PV through the leasing model.

It is estimated that the middle class population in India could touch 250 million over the course of the next 5 years. Thus propositions such as leasing models and community level rooftop solar installations (an alternative mechanism addressing another pain-point – how exactly can the roof of, say an apartment be shared amongst the residents) could in all honesty find many takers.