India has made an aggressive stated target of 40 GW grid-connected rooftop installations by 2022, and in keeping with that the central government has raised the budget up to INR 50 billion ($768 million).
Lets look at the basics – It is common knowledge that the rooftop projects require high initial capital investment and low operating costs. The typical rooftop project has a size of less than 150 kW, considering constraints on units in cities and crowded urban clusters. The average life of the project is 25 years, where, the debt-equity ratio stands at 70:30. The average capital costs required for 100 kW is INR 5 million. And the installation time averages less than two months, inclusive of the time needed for the various permissions. The only area where permissions are uncertain are the net metering applications, which many state utilities have now started to wake up to and streamline procedures.
The rooftop projects are marked by the average debt service coverage ratio (DSCR) of 1.2 times. The expected equity IRR is moderate, that is, more than 12%, but confirm constant returns to the investor. And if proper bundling, higher ratings, and track record are sustained, then the sector can attract investors looking for continuous flows.
In the rooftop sector, the State Bank of India (SBI) together with the World Bank has sanctioned INR 40.7 billion ($625 million) for grid-connected solar rooftops. Similarly, Punjab National Bank (PNB) has received INR 32.5 billion ($500 million) multi-tranche facility by Asian Development Bank (ADB). IREDA and RBL Bank are also supporting the sector through loans.