Solar grid parity is always the most coveted magic pill for solar revolution. New technologies adoption and permeation is very slow process in electricity market due to legacy issues and reliability concerns. Surprisingly, rooftop solar tariff is now well below the consumer facing electricity tariffs in residential, industrial and commercial segments of more than 90% Indian states and techno-commercially proven!
According to bridge to India report, Rooftop solar has maintained around 10% share of overall solar capacity addition in India. Rooftop solar has crossed the symbolic 1 GW cumulative installation mark in 2016 against 8GW utility scale solar. The solar rooftop’s share in India is much lower than other key markets such as US (46%), Germany (73%), China (18%) and Australia (97%). Rooftop solar capacity is projected to reach 12.7GW by 2021. The Indian government wants to improve this share to 40% (or 40 GW) by 2022.
Where will this 30% share come from?
Substantial demand from commercial, industrial customers and public sector, primarily from SECI promoted tenders are expected to continue to provide great demand to the segment over the next few years. Government is giving attractive 30% subsidies to residential customers but demand from this segment is weak. Solar system costs are falling average 12% each year. Cost reduction has become two edged sword for solar. Buyers postpone buying in anticipation of lower rates!
Why solar penetration in residential segment is weak despite subsidies?
The perception depicts the electricity as one of the necessities whose presence we feel when there is No electricity & when available, we don’t at all bother about connecting any appliance to socket to load it any time in day or night. We call it ease of using grid electricity. The moment the electricity tariff rises, we start to realize the economics of electricity but we forget it next day and keep running the electricity with no changes in usage pattern. Whereas, distributed/rooftop solar is limited in day time and constrained by size and capacity in off grid mode; one can’t just connect any appliance and crank it up above the installed solar capacity. One can always feel solar power’s presence and absence, both!
Solar net metering compliments grid and storage supplements when grid is not available and thereby addresses the solar intermittency. Still, people in general are not impressed and not ready to challenge their perception about solar.
When I visited housing societies during last few years, I found that they are always on mission to save every single rupee on electricity expense and delegate this responsibility to a person having some basic information about electrical system. They install multiple meters for common use facilities to shift every meter to lowest possible billing slab and thereby try lowering aggregate bill amount. They search for all the options, go for energy efficient retrofits & implement the exhibits. And, they flabbergast to see their electricity expense drastically rising year on year & the responsible person leading this change is always made a scapegoat and his future proposals invite critical scrutiny!
Housing societies find the upfront solar investment prohibitory and hence they show initial interest in PPA mode. Subsidy is not available in PPA mode (monthly installment against actual generation) because asset ownership is with developer but Society’s committee asks for the alternative ways to grab subsidies. They suggest hybrid of Capex (upfront payment) and PPA where the PPA offers to be structured as direct buying. The developer will offer the system as loan and society will pay EMI as per agreed PPA tariff so that society will get subsidy!
What make most of the industrial and commercial customers still swear by grid power?
Industrial and commercial customers understand the savings due to solar but they are constrained by roof-space, solar provides only 20-30% demand & has around 20% IRR. They expect IRRs upwards of 30%. Therefore, they think that it doesn’t make financial sense to surrender their rooftops from 25 years even if savings adds directly to the bottom-line! Commercial buyers mostly face barriers of renter owner conflict.
Organizations or companies show the swarm effect of individual behavior. People working in companies hail from residential societies!
I am always fascinated by behavioral traits of greed. Greed is good but where’s greed when it comes to going solar?
Buyers expect the tariff of kilowatt solar systems to be same or below the tariff (Rs. 4.25/kWH) offered for 500MW. They are also not ready to provide any security or bank guarantee in PPA. Are they bargaining? When prices are plummeting return on investment is not a right way to sell but for now buyers have different motivations, and that’s what installers need to think about.
Society’s interaction with solar technology can be attributed to behavioral traits of the confirmation bias and single action bias. Confirmation bias is known to be working when person try to confirm the existing beliefs and perception about short comings of new technology (solar is new to them) which they might have read or listened from other sources before actually observing or experiencing. The single action bias accentuates when they believe that they have done their part of good (for example, installed LED lights) and do not need to do anything else even if it adds significant value.
Dispelling these cognitive biases and capturing greed in their expectations can multiply chances of adopting solar. There are few ways to address this issue. Convince the people that common knowledge could be common misconception. Find out that wisdom of crowd is failing. This idea, termed the wisdom of crowds, is that in large group errors of judgments should cancel each other out. Prelec and Steyvers suggest extracting wisdom from the crowd based on a democratic voting procedure. They are simple to apply and preserve the independence of personal judgment However, democratic methods have serious limitations. They are biased for shallow, lowest common denominator information, at the expense of novel or specialized knowledge that is not widely shared. Adjustments based on measuring confidence do not solve this problem reliably. There is an alternative to a democratic vote: select the answer that is more popular than people predict.
The emotionality of voters have projective consequences, with people going solar imagining their own future social and economic behavior to be severely affected by the perspective of a climate change, for instance in terms of their likelihood to buy solar. We need to better understand how and when this range of emotions occur, and what makes a given voter more or less likely to experience them — be it because of their personal characteristics, the way they interact with the electoral process, or whether they voted or not (and if so for the winning or losing proposition). Understanding how those positive and negative reactions are triggered is crucial because they could have serious consequences for outcome. On the one hand, feeling closer to one's community and a sense of responsibility for its future may lead to greater legitimization of the system, acceptance of its outputs, and civically respectful behavior. On the other hand, emotional dislike towards another electoral camp, whilst seemingly very rare, seems to have become the name of the game in an increasing number of cases. In other words, what these societies do, matters.
Utilities around the world can sense the tide turning in favor of solar. They are fighting tooth to nail to change and usher new regulations by increasing charges of net metering, electricity duty and grid usage. It can be seen as their desperate efforts to survive in ever changing electricity market.
A Report from the Business and Sustainable Development Commission indicates that developing sustainable business models could unlock $12 trillion of economic opportunities and create almost 400 million jobs by 2030.Ninety-six percent of CEOs taking part in an informal survey indicated that by 2020 a price on carbon above $20 a ton would be needed to effectively shift investment. And most think the price should rise over time with more than 63% saying it should be above $40 by 2025. To reduce this risk, companies need to find new ways of doing business. The sooner this is accomplished, the less disruptive and more cost-effective the transition will be.
Looking into the future, the combination of battery storage and solar will provide customers with greater flexibility, consistent with a desire by many customers to become less dependent on traditional energy companies. Virtual power plants using digital energy distribution network and storage reaching $100/kWH and solar with storage reaching $0.10/kWh make solar a more compelling choice. We might reach this milestone by 2020!
The simplicity of financing on tap will also drive and keep solar on up track. It is also evident that auction reduces prices so if we can have transparent and real-time auctions for solar purchase transactions; it will surely boost solar adoption!
We shall not wait more to set ourselves on a path towards sustainable development with solar. Climate change has gone too far already. We cannot turn the change back, but we can change the way we deal with change. I can still remember the lines of Leonardo Di Caprio from Oscar 2016 ceremony, “For those people out there whose voices have been drowned out by the politics of greed; Let us not take this planet for granted.”