• Jun 05, 2019

Raising the roof: The catalyzing role of small and medium businesses in India’s rooftop solar market

Abhishek Bhaskar 

India has entered an exciting new era in its efforts to meet growing and urgent energy demands. Among other goals, the government has set a target of 40 gigawatts (GW) of rooftop solar capacity by 2022. It is an ambitious aim, but there are ways to get there.

Micro, small, and medium enterprises (MSME) contribute approximately 29% of India’s GDP, 45% of national manufacturing output, and 40% of all exports. With such an outsized share of the economy, a new study commissioned by the Climate Investment Funds (CIF) says the MSME sector could play a defining role in scaling up rooftop solar in India.

The publication, Scaling up rooftop solar in SME sector in India, evaluates options for leveraging the critical MSME sector to expand India’s rooftop solar market. These include developing an aggregation vehicle for pooling smaller-scale projects to reduce transaction costs, regulatory reforms to support aggregation, dedicated MSME-based portfolios within existing and new lines of concessional credit, innovative financing tools, enhanced awareness, and capacity building.

The World Bank, Asian Development Bank (ADB), and other groups have recently recognized the MSME sector as a key strategic pillar to scale up rooftop solar in the country. Simon Stolp, the World Bank’s energy lead for South Asia, recently called SMEs a promising area:

“The World Bank has long supported India’s renewable energy ambitions, including rooftop solar, which is an integral part of our clean energy strategy. Supported by the Clean Technology Fund (CTF), the program has delivered financing to close to 300 MW so far working in close partnership with State Bank of India (SBI) and is all poised to surpass its initial goals. This CTF supported work is quite timely since a significant amount of this financing goes to installations for SMEs, a sector that we have also identified as one of the potential areas for future growth.”

Within CIF, India represents one of the largest portfolios in its Clean Technology Fund (CTF), amounting to nearly $800 million in investments for developing solar parks, rooftop solar, floating solar, battery storage, and more.

Prior to CIF’s engagement, there was a lack of awareness in the market which was reflected in the limited availability and higher costs of financing around solar. Since then, CTF has supported two of the four major lines of credit for rooftop solar in the country in partnership with the World Bank, Asian Development Bank (ADB), State Bank of India (SBI), and Punjab National Bank (PNB). SBI and PNB are two of the largest public sector banks in India, delivering risk-bearing, concessional capital along with technical assistance to address key barriers affecting the sector. These lines of credit have played a major role in supporting rooftop solar growth in the country.

Perhaps most critically, private sector leaders in India agree that the sector can play an important role. “With falling solar tariffs, rooftop solar solutions promises to be a game-changer for [the] power procurement landscape of MSMEs in India,” said Hiten Parikh, head of Everest Solar.

India is a shining example of what can be achieved with the right partnerships and financing. The successes there have wide-ranging implications for other countries and the role of the private sector in climate-smart development. But there remains work to do, and CIF stands ready to do its part to help deliver.

Read more about CIF and clean energy:

Deloitte study on scaling up rooftop solar in SME sector in India