Distributed solar financing: Unlocking investments for a greener future

The proliferation of distributed solar energy in India faces significant challenges, primarily due to the high initial investment costs of setting up a solar energy system. Also, the motivation to invest in these solutions is often found lacking, despite government subsidy schemes like the Pradhan Mantri Kisan Urja Suraksha evam Utthaan Mahabhiyaan (PM-KUSUM) and the PM Surya Ghar: Muft Bijli Yojana. This is because the sectors for which these schemes are applicable already enjoy electricity subsidy: electricity for the agriculture sector is subsidised across India, while more and more states are providing subsidised electricity to residential consumers. Thus, to augment investments in distributed solar energy, innovative financing approaches need to be implemented. One such mechanism involves aggregating local demand and installing distributed solar energy systems at centralised locations. Third parties can invest in such a model and leverage innovative metering solutions like virtual net metering or group net metering to achieve economies of scale. However, protecting the interests of third parties is a challenge, necessitating robust frameworks for contracts and power purchase agreements to ensure mutual benefits.

Enhancing consumer engagement through innovative financing solutions is crucial for scaling up distributed solar energy in India. Though the models discussed in this article come with their unique advantages and challenges, they collectively represent viable pathways to unlock investments in this area for a sustainable future. By prioritising their implementation and fostering collaboration among all the stakeholders, India can accelerate its transition towards a greener energy future.

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