Cabinet Committee on Economic Affairs restructures proposed SRISTI scheme with changes in incentives for DISCOMs and residential sector

The Cabinet Committee on Economic Affairs (CCEA) approved a total funding of Rs 11,814 crore for Phase II of the grid-connected rooftop solar programme on February 19, 2019. The total solar rooftop installation target is 40 gigawatts (GW) by 2022. As of December 2018, the installed capacity was 1.4 GW.

Originally, the scheme for Phase II was proposed and drafted in December 2017, under Sustainable Rooftop Implementation for Solar Transfiguration of India (SRISTI).

In response to the tepid growth under the pre-exsiting subsidy incentives, SRISTI addressed some roadblocks, specifically the reluctance of distribution companies (DISCOMs) considering solar rooftop (SRT) potentially took away high-paying customers — a situation that further entrenches DISCOMs in their financial woes.

Additionally, it also sought to sweeten the deal for the residential segment where the uptake continues to be underwhelming.

The final approved plan — Phase II (SRISTI finds no mention as of now) — appears to have restructured the offerings in SRISTI. For one, at Rs 11,814 crore, it sanctions half the original proposed amount of Rs 23,450 crore. Second, Phase II effectively covers 22 GW as opposed to the total 40 GW under SRISTI.

Changes in incentives for the residential sector SRISTI Phase II Target Capacity 5,000 megawatts (MW) 4,000 MW Incentive for residential sectior 30% of benchmark system cost for systems sized 1-5kW 40% of benchmark system cost for systems sized 1-3 kW 20% for systems sized 3-10kW 20% for housing socieies and residential welfare associations (RWA) for systems sized 10-500kW.

Changes in incremental incentives for DISCOMs SRISTI Phase II Target Capacity 35,000 MW 18,000 MW Parameter Incremental Incentive (SRISTI) Incremental Incentive (Phase II) Installed capacity upto 10% of the installed base capacity within one financial year (FY) 5% of the project cost of the capacity installed over the previous years’ installed (i.e. base) capacity No incentive on offer Installed capacity above 10% and upto 15% of the installed base capacity within one FY 5% of the project cost for 10% of the capacity installed over base + 10% of the project cost for any additional capacity over the 10% 5% of the project cost for capacity achieved above 10% of the base Installed capacity over 15% of base within one FY 5% of the project cost for 10% of the capacity installed over base + 10% of the project cost for any additional capacity over the 10% to 15% of base + 15% of the project cost for additonal capacity over 15% of base 5% of the project cost for capacity achieved above 10% and upto 15% of the base + 10% of the project cost for capacity over 15% of the base

The Phase II scheme’s increased incentives for smaller residential rooftop systems is a welcome move. Stand-alone houses, which can build SRT only under the capital expenditure model at the moment, are likely to incentivise wary houseowners who have to invest their equity or obtain a loan to finance the system.

The 40 per cent relief on the system cost is likely to encourage more home owners to make the transition.

While the DISCOM incentives have been scaled down, it was unclear from the get-go whether even the SRISTI proposal would galvanise DISCOMs to be more enthusiastic participants in enabling SRT.

A real SRT revolution will need to have DISCOMs reap real revenues and advantages, not mere subsidies. It remains to be seen how the DISCOMs view the scheme and respond to it in terms of effective implementation.