What makes Tamil Nadu a leader in the Indian rooftop solar market?

BRIDGE TO INDIA recently carried out a first of its kind analysis on India’s rooftop solar market in India (refer here). It is based on extensive interviews the team has conducted with almost all stakeholders in the market over the last few months. With about one-fifth of all rooftop solar installations concentrated in Tamil Nadu, the state has emerged as the largest rooftop solar market in the country.

  • Adoption rates seem to be driven by growing consumer awareness, leading to less business development effort by the installers and EPC companies
  • Long and frequent power cuts and high usage of expensive backup sources of power have made solar attractive.
  • However, Tamil Nadu has currently achieved a much more stable power supply, leading to a reduction in solar demand. We believe that this is a short term effect.
  • Awareness and dissemination of knowledge is crucial if the rooftop solar market is to grow

The primary reason why Tamil Nadu has been a good market for rooftop solar has been the high awareness of consumers towards intermittent sources of energy in the state. The state is one of the early movers in wind technology and has the highest installed wind capacity (about 7 GW) in India. Several large, industrial consumers have already opted for wind based power to save on energy costs. Due to wider awareness, the effort on customer education and business development is comparatively lower than in other Indian states. On an average, in India, the business development efforts to convince clients to go solar is still upwards of six months. This comes at a significant cost to service providers. By saving on this effort, system costs can be reduced and turnaround time improved.

Another reason for the higher adoption of rooftop solar has been the long duration of power cuts faced by industrial customers who have to resort to costly power backup options like diesel gen-sets.

jyoti blog as on 4.12.14Source: Bridge to India analysis

In the past year, the grid power supply situation in Tamil Nadu has improved, leading to a market downturn in demand for solar rooftop systems. We believe, however, that this is a short term effect and that energy economics will make solar an attractive choice in Tamil Nadu again, soon.

Jyoti Gulia is Senior Manager – Market Intelligence at BRIDGE TO INDIA.

3 comments

  • Great piece on roof top solar in India.Its no surprise that TN leads the roof top solar installations in the country as demand for power is much more than supply and TN buying short term power at INR 7 to 8 per unit. is it why the grid power scenario has improved? or is there new capacity addition? but what is the basis of your believe that grid scenario improvement is for short term. Can you please explain?

    Thanking You.
    RK

    • In TN its just the higher awareness level towards intermittent sources of energy. No significant change in grid scenario. The major reasons for rising solar in TN are; lookout for new sources of power generation as wind is already saturated in TN; obv AD benefit; and lastly to handle power cuts captive consumption is on a rise and rooftop solar is perfect fit for that.

  • A far more compelling reason for such a high adoption rate in TN is that the industry is well organized. Most of the large industries in TN is controlled by families that are somehow linked together for generations either by ways of inter-marriage between powerful business barons or simply because they have close connections to one another.

    If you go back in time, one can observe a similar effect for captive wind power projects. So it doesn’t come as a surprise that solar has seen a similar adoption.

    Good business links or not, a far more fundamental question is why should the industry in TN be pro solar? Is it because of the cost per unit? Is it because they are pro-technology? My own guess is Accelerated Depreciation (AD). AD for wind was taken away a few years ago (only to be re-instated). This shifted the focus from wind to solar. My own sense is industries will go back to wind given the far more attractive returns. Ultimately, AD is a fantastic money-laundering scheme -> the by-product of this is a vibrant renewable energy industry.

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