In calendar year 2023, the residential market continued to show signs of healthy growth with estimated capacity addition up almost 50% y-o-y at 1,085 MW. Total rooftop solar capacity addition, though, was up only 8% y-o-y at 2,856 MW. addition in the corporate segment was down 7% y-o-y at 1,770 MW as many consumers deferred project implementation amid uncertainty in the module market and falling prices. Total installed rooftop solar capacity is estimated to have grown to 14,484 MW, with the share of industrial, commercial and residential segments at 53%, 22% and 25%, respectively.
Figure 1: New installations by consumer segment (LHS) and total capacity as of December 2023 (RHS), MW
Source: CRISIL Research
Note: Years denote calendar years.
The capital expenditure (CAPEX) model continued to be the preferred route with 90% share in total capacity addition, while the share of the operating expenses (OPEX) model fell for the third straight year to 10% in 2023 compared with 27% in 2020. Loss of appetite from both demand and supply sides has hurt the OPEX market due to the absence of large-scale innovative business models targeting small and medium enterprises (SME).
The corporate market, historically plagued by policy flux, saw a turnaround in some states with multiple positive developments. Corporate rooftop solar capacity addition in Karnataka, estimated at 723 MW in 2023, rose 103% y-o-y due to a higher system size limit of 2 MW for net metered systems and smooth policy implementation. The state has proposed several consumer-friendly provisions including removal of the 2 MW project size limit under net metering, effectively increasing the limit up to sanctioned load and permitted net metering for OPEX systems and Open Access (OA) consumers. Capacity addition in Maharashtra slowed down during the year but is expected to pick up sharply over the next one to two years due to recent positive changes in rooftop solar regulations. Uttar Pradesh is also showing signs of steady growth, with corporate capacity addition up 133% in the year, aided mainly by a shift from gross metering to net billing over the past two years.
On the other hand, the Rajasthan market slowed down further due to imposition of grid charges on behind-the-meter (BTM) systems. The market is also held back in other states due to ad-hoc restrictions imposed on BTM systems. Despite the resistance of state DISCOMs, BTM is expected to become the default route for large corporates due to exemption from Approved List of Models and Manufacturers (ALMM) requirements.
Source: CRISIL Research
Note: Years denote calendar years.
Growth in the residential market was again led by Gujarat (644 MW), Kerala and Maharashtra (119 MW each). The market has constantly been growing since 2020, led by increased consumer awareness and affordability as MNRE ensured greater access to the capital subsidy scheme.
Market prospects are set to improve further, led by the launch of a new residential rooftop solar scheme with a target to add 30 GW capacity by FY 2027 supported by falling module costs and increasing domestic module manufacturing capacity. EPC costs for residential systems, currently estimated at 48/Wp, fell 25% y-o-y in 2023, improving the market outlook significantly. We expect the residential market to grow over four times to reach a scale of 4 GW annually by 2026. But progress is still expected to fall short of government targets due to limited availability of domestically produced cells over the next few years and a host of other challenges.
In the corporate rooftop solar market, positive policy developments in Karnataka, Maharashtra and Uttar Pradesh are encouraging. More states should ideally follow suit and liberalise rooftop solar regulations, especially given exacerbating land and transmission challenges in the OA market.
The post Residential segment leads the way for rooftop solar sector growth appeared first on BRIDGE TO INDIA.