Government initiatives boost rooftop solar in India; Stocks to watch out

The Indian government has set its sights on significantly boosting rooftop solar installations across the country, with a particular focus on the residential sector. The recently launched PM-Surya Ghar: Muft Bijli Yojana (PM-SGB MY) scheme offers a compelling incentive – free electricity up to 300 units per month – for up to 10 million households that install rooftop solar panels. This initiative, coupled with other recent policy measures, has the potential to be a game-changer for the Indian rooftop solar market.

Stalled Progress in Rooftop Solar

Despite its potential to play a critical role in India’s renewable energy goals, progress in rooftop solar has been sluggish so far. As of February 2024, the country’s grid-connected rooftop solar capacity stood at just 11.08 GW, with a meagre 3 GW attributable to the residential sector. This falls far short of the initial target of 40 GW by 2022.

Several factors have contributed to the slow uptake of rooftop solar in the residential sector. These include a lack of awareness about the benefits of solar energy, high upfront costs, complex regulations, and difficulties in obtaining net metering permissions.

State-wise Rooftop Solar Capacity in India (as of February 2024)

PM-Surya Ghar Yojana: A Potential Game Changer

The PM-SGB MY scheme has the potential to address some of these challenges and significantly accelerate rooftop solar adoption in the residential sector. The scheme offers a subsidy of up to Rs 78,000 for installing a 3-kW rooftop solar system, bringing down the upfront cost for homeowners. Additionally, the scheme provides access to collateral-free loans at around 7% interest, making rooftop solar even more financially attractive.

Implementation and Expected Impact

To ensure effective implementation, the scheme leverages eight central public sector undertakings (CPSUs) to act as renewable energy service companies (RESCOs) responsible for installing rooftop solar systems in 10 million households. REC Limited has been appointed as the central nodal agency to monitor and coordinate progress.

The PM-SGB MY scheme is expected to have a significant positive impact on the rooftop solar sector. Estimates suggest the scheme will:

• Add 30 GW of solar capacity through rooftop installations in the residential sector, substantially increasing India’s overall solar power generation.
• Generate 1,000 billion units (BU) of electricity, contributing to the country’s clean energy goals.
• Reduce 720 million tonnes of CO2 equivalent emissions over the 25-year lifetime of rooftop systems, providing significant environmental benefits.

Other Supportive Measures

The government has introduced additional measures to improve the rooftop solar ecosystem. These include waiving the feasibility study mandate for rooftop solar systems up to 10 kW, updating benchmarks for central financial assistance under the rooftop solar program, and incorporating enabling provisions in the electricity consumer rules to expedite rooftop solar development.

While the PM-SGB MY scheme and other recent policy measures are positive steps, some challenges remain. These include potential resistance from DISCOMs who may view rooftop solar as a threat to their current business model, the need for centralized bulk procurement to leverage economies of scale, and addressing issues related to net metering policies and access to finance.

Stocks to watch out

The anticipated surge in rooftop solar installations is likely to translate into a significant increase in demand for solar panels, inverters, batteries, and other related equipment. This growth is expected to benefit a range of companies in the solar space.

Leading domestic manufacturers like Tata Power, Alpex Solar, Websol Energy Systems, Urja Global, Australian Premium Solar and Borosil Renewables are some of the stock to watch out as the scheme incentivizes residential rooftop installations.

Component manufacturers like Havells and ABB India, which supply critical balance of system (BOS) components, are likely to see a rise in demand as well.

Solar Stock Watchlist

While the exact financial impact remains to be seen, the overall outlook for the solar sector in India is undeniably positive. With the government’s ambitious targets and supportive policies, investors keeping a close eye on these companies and the broader solar industry can potentially position themselves to benefit from this exciting growth story.

Conclusion

The Indian government’s recent push for rooftop solar, particularly through the PM-SGB MY scheme, holds immense promise. If implemented effectively, this initiative has the potential to significantly increase rooftop solar adoption in the residential sector, contributing to India’s renewable energy goals and creating a cleaner, more sustainable future.

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. The information is based on various secondary sources on the internet and is subject to change. Please consult with a financial expert before making investment decisions.