Context:

India's ambitious renewable energy goals, as outlined in the Union Budget 2024, have placed a strong emphasis on rooftop solar to drive sustainable growth. While the residential sector has received significant attention, it is imperative to devise a targeted scheme to enable Micro, Small, and Medium Enterprises (MSMEs) to harness the benefits of solar energy. The sluggish growth of rooftop solar in India poses a bottleneck to achieving the set targets, with the current installed capacity falling below 20 percent of the total solar capacity. This stands in stark contrast to solarized nations like Germany, Australia, and the United States, where rooftop installations nearly match their utility-scale counterparts.

Current Landscape of Rooftop Solar Adoption

Commercial and Industrial (C&I) power consumers, mainly large firms, currently dominate rooftop solar installations, accounting for around 80 percent. However, MSMEs, comprising 30 percent of India's gross value added, have experienced limited adoption despite contributing significantly to industrial energy demand. With approximately 63 million MSMEs in India, prioritizing rooftop solar adoption in this sector becomes crucial for achieving broader renewable energy goals.

The Ministry of Renewable Energy conducted a survey revealing key insights into the potential benefits for MSMEs. The study highlighted that the electricity cost constitutes a higher percentage of total operational costs for MSMEs (between 5-20 percent) compared to larger firms. Therefore, a shift to rooftop solar could substantially reduce production costs by decreasing reliance on grid electricity and even allow for selling excess units back to utilities.

Aligning Solar Adoption with MSME Power Consumption Patterns

MSMEs in the manufacturing sector exhibit power consumption patterns well-suited for rooftop adoption. A study indicates that approximately 75 percent of MSME electricity consumption occurs between 9 am and 4 pm, coinciding with ample sunlight availability. This presents an opportunity for rooftop solar to effectively cater to their electricity demand without significant operational changes and eliminates the need for costly battery storage systems.

Additionally, MSMEs often face power cuts, compelling them to resort to diesel generators for backup power, contributing to both air pollution and increased operational expenses. Rooftop solar, with its potential to reduce reliance on diesel generators, can enhance power reliability and affordability for MSMEs, particularly during daylight hours when power cuts are most frequent.

Challenges Faced by MSMEs in Rooftop Solar Adoption

Despite the compelling case for MSME rooftop adoption, renewable energy remains a low priority for these firms due to limited capacity and resources. MSMEs often lack the means to assess the technical and economic feasibility of transitioning to rooftop solar. There is a prevailing perception that the high initial investment makes rooftop solar cost-prohibitive, even though evidence suggests long-term cost-effectiveness compared to grid electricity.

Furthermore, MSMEs face challenges related to a lack of awareness about regulatory requirements for rooftop solar and net metering. The most significant hurdle, however, lies in financing, as many MSMEs are not part of the formal economy, have poor creditworthiness, and encounter difficulties in securing loans at reasonable interest rates.

The Need for Targeted Support and Economic Incentives

To overcome these challenges, MSMEs require targeted support to create favorable conditions for rooftop adoption. While subsidies for rooftop solar are currently limited to residential consumers, there is a pressing need to extend some form of economic incentives to MSMEs. One approach could involve expanding subsidies under the National Solar Rooftop Scheme to C&I consumers, specifically those with connected loads up to a certain level, ensuring that smaller firms facing significant challenges receive the necessary support.

Moreover, creating successful examples of MSME rooftop solar adoption is crucial in illustrating how these enterprises can overcome technical and financial obstacles. A cluster-based approach, focusing on pilot projects, capacity-building initiatives, and aggregating demand for solar developers, could serve as a viable model. India's 400 industrial MSME clusters present an opportunity for a national program, similar to the one implemented by the Bureau of Energy Efficiency (BEE) for energy efficiency improvement.

A Cluster-Based MSME Rooftop Solar Program

Implementing a national cluster-based MSME rooftop solar program in 10-20 clusters, covering industries best suited for rooftop adoption, could address various challenges. The program could focus on piloting projects and capacity-building initiatives to help MSMEs identify suitable rooftop solar technologies and assess financial implications based on their operational patterns. Additionally, aggregating demand for solar developers and providing financial guarantees through discoms or state governments could extend operational cost-based business models to MSMEs.

Building creditworthiness is vital for MSMEs, and the program could facilitate connections between industrial units and international financial institutions and national development banks, providing low-interest loans specifically for rooftop solar. This comprehensive approach aims to create successful case studies, build awareness, and facilitate the economic viability of rooftop solar adoption for MSMEs.

The Role of Economic Incentives and the Pradhanmantri Suryoday Yojana

While subsidies play a crucial role, economic incentives tailored to the needs of MSMEs are essential. Extending the Pradhanmantri Suryoday Yojana (PSY) model, which aims to install rooftop solar in 10 million households, to MSMEs can invigorate their interest in solar adoption. Similar to residential subsidies, targeted incentives for MSMEs could help bridge the financial gap and encourage widespread adoption.

Conclusion:

In conclusion, empowering MSMEs through rooftop solar adoption is a policy imperative for India's sustainable energy future. Despite the challenges, the potential benefits, including cost reduction, enhanced power reliability, and environmental sustainability, make it a compelling proposition. A strategic, cluster-based approach, coupled with economic incentives and targeted financial instruments, can pave the way for greater MSME rooftop solar adoption. Prime Minister Modi's recent announcement of the Pradhanmantri Suryoday Yojana for households underscores the need for a similar scheme to energize MSMEs, ensuring that the backbone of the Indian economy harnesses the full potential of solar energy.