Delhi’s Residential Solar Program Offers Guaranteed Payment Security to Installers

The program aims at rooftop solar installations under the RESCO model

November 29, 2018


The Delhi government recently approved the Mukhyamantri Solar Power Program to give the necessary and required impetus to solar power and its adoption in Delhi. This program will apply to domestic (residential) sector consumers in Delhi.

The government recognizes the fact that the solar installations on government buildings and educational institutions are about 105 MW compared to the 5 MW installations so far in the residential segment. To bridge this gap and realize the concept of “Solarize Delhi” under the Delhi Solar Policy 2016, the government realizes this huge untapped potential has to be utilized.

According to the government, a good part of solar power potential in the residential segment is on the rooftops of approximately 1,990 registered co-operative group housing societies in Delhi that have shown interest in installation under the RESCO model. But due to lack of payment security mechanism, rooftop installers were reluctant to offer their services resulting in power rates in societies remaining higher in comparison to rates for government buildings.

The Ministry of New and Renewable Energy (MNRE) has approved 40 MW of grid-connected rooftop solar projects for the domestic/institutional/social segment for Delhi under its subsidy  schemes, allowing award of work order within six months and project completion time of 15 months from the date of approval.

To attract more installers under the RESCO model and for better financing to developers, the government recognized the need for a bankable PPA and guaranteed payment security mechanism for installers. In tenders for government buildings it was observed that more installers’ participation with better financing options lead to competitive rates. In a good tender, the government noticed that the levelized rates for 50 kW or more capacity would come down. Considering a three percent annual escalation in solar tariff, with a Generation Based Incentive (GBI) of ₹2.00 ($0.029)/kWh, the solar tariff could be in the range of ₹1.00-1.50 ($0.014-0.021)/kWh in initial years. In tenders for government buildings, levelized tariff discovered in Indraprastha Power Generation Co. Ltd. (IPGCL) tenders were ₹3.30-3.64 ($0.047-0.052)/kWh for solar capacity above 50 kW. With this background and research, the Delhi government has launched the program.

Key Highlights of the Program:

  • This program will target group housing societies (GHS).
  • There will be emphasis on RESCO model of solar installation for larger installations.
  • GBI is extended for a period of five years starting from 2019-20. It will also cover solar installations in residential sector including GHS; both for existing solar installation and new installations for which MNRE approval has been obtained.
  • For a typical solar power project, this will amount to GBI payment of ₹13,000 (~$186)/kW in five years. This payment will amount to 22-25 percent of benchmark costs.
  • GBI disbursement will be made on half-yearly basis so that consumers have government support in form of GBI in the first year of solar installation without affecting the matter of quality.
  • The instrument of GBI will also be used as the payment security mechanism. In case a consumer fails to make payment to the installer, GBI may be passed on to the installer.
  • This payment security mechanism for five years will be applicable to RESCO model.
  • The new GBI will also cover already installed solar plants till new tenders are finalized. Such installation will be allowed GBI benefits for five years period from the date of installation.
  • IPGCL will be the bid coordinator on behalf of power department.

The new policy has drawn its elements from some of the best practices of Madhya Pradesh Urja Vikas Nigam Limited (MPUVNL)’s auction to develop 35 MW of grid-connected rooftop solar under RESCO model.

Payment security guarantee by Delhi government will make a strong case for better financing to intallers which in turn can benefit consumers. As an effect of the existence of payment security mechanism, the rates can fall below Average Power Purchase Cost (APPC) and in such cases the customers will be further incentivized to install solar systems beyond the sanctioned load.

The Delhi government has been making various strides for the expansion of renewable energy in meeting its energy requirements and to combat the deteriorating air quality. Recently, the Delhi government also approved Mukhyamantri Agriculture-cum Solar Farm Program to increase farmer’s income and achieve the state’s solar target as per the Delhi Solar Policy 2016.

In July 2018, the Arvind Kejriwal-led Aam Aadmi Party (AAP) government had announced its plan to launch a Solar Rooftop Demand Aggregation Program for domestic customers in the nation’s capital.

Saumy Prateek Saumy is a senior staff reporter with covering business and energy news since 2016. Prior to Mercom, Saumy was a copy editor at Thomson Reuters. Saumy earned his Bachelors Degree in Journalism & Mass Communication from the Manipal Institute of Communication at Manipal University. More articles from Saumy Prateek.