Will New MNRE Incentives for DISCOMs Spur Solar Rooftop Growth in India?

January 16, 2017


The Ministry of New and Renewable Energy (MNRE) has announced financial assistance in the form of grants to distribution companies (DISCOMs) of up to Rs.3.75 million (~$55,000)/MW for rooftop solar installations. Through this program, the MNRE immediately wants to:

  • expand rooftop solar projects by supporting capacity of 1,350 MW, and
  • support DISCOMs to assess upgrade and modernization requirements of their distribution network, facilitate demand aggregation, develop consumer awareness, develop enabling forms/processes, meter/equipment procurement, and capacity development.

The financial assistance to DISCOMs is contingent upon meeting an extensive list of conditions set by the MNRE, including setting up a separate rooftop solar “cell” to execute and implement this program.

The MNRE is also proposing a financial award that will identify best practices of DISCOMs, state nodal agencies and award the best performance at DISCOM, Division and Zonal levels. The MNRE is currently targeting 40 GW of solar rooftop by 2022, of which only 605 MW have been installed, according to Mercom’s India Solar Project Tracker.

DISCOMs can still utilize other incentives along with those provided under this program.

“States and union territories have been providing incentives to rooftop installers, yet solar rooftop did not take off as expected,” stated an MNRE official. “The new incentive announced by the MNRE will strengthen the sector on both sides: the sector will be incentivized now through the MNRE with grants to DISCOMs, and state nodal agencies’ grants/subsidies to consumers installing rooftop.”

Recently, state nodal agencies in HaryanaChandigarh, and Madhya Pradesh have announced incentives for rooftop solar.

The MNRE official added that rooftop solar can be a way to generate some revenue for households through net metering, creating interest among homeowners. The incentives for DISCOMs will remove the major bottleneck of signing power purchase agreements (PPAs). The MNRE official believes while the target of 40 GW might be huge, it is attainable, and the MNRE program is just in time to address the challenges facing solar rooftop.

“This will empower the DISCOM to focus on rooftop solar as the incentive/MW is very attractive,” an official at Uttarakhand Power Corporation (UPCL) said.

Officials at other DISCOMs and DISCOM holding companies welcomed the MNRE’s incentive program, but showed concern around the timeframe of fund disbursement. “The MNRE’s incentive is good. For it to be immediately beneficial, the governing body should make the process of getting the incentive easier,” stated an official at Madhya Pradesh Paschim Kshetra Vidyut Vitran Co. Ltd.

While developers were happy to see the incentive, there were also concerns about the process and size of the incentive. “The MNRE should have offered up to Rs.5 million (~$73,244)/MW as an incentive to make the program a success,” said a source at Rays Power Experts Private Limited.

“The program is a welcome one, but the MNRE should speed up process for getting clearances,” added another large rooftop installer.

The MNRE is targeting 5 GW of rooftop solar to be installed in the financial year 2017-18. Mercom has reported that falling module prices have been a boon for the solar sector. According to Mercom’s Solar Quarterly Report, module prices are expected to further decline with the slowdown in China. This combined with the new incentives is expected to be beneficial for Indian rooftop solar sector.

Image Credit: “Rooftop Solar Panels” (CC BY 2.0) by NRDC pix