To date, India has achieved 2.5 GW of rooftop solar installations, mostly on commercial and industrial roofs. In the residential market specifically, there is vast potential of over 60 GW, but only 0.5 GW had been installed as of March 2018. Although there are several factors working in the market’s favor, including a renewed push from the government, rising grid tariffs, and declining PV prices, there are several barriers that are inhibiting the market.
Customers face high upfront costs and perceived performance risk. And developers face difficulties in identifying customers, high customer acquisition costs, limited access to commercial finance, and long payback periods. This instrument employs innovative features to overcome these barriers and mobilize the adoption of residential rooftop solar in uncharted smaller-sized cities in India.
This instrument is a lease model that targets persistent barriers to the deployment of residential rooftop solar, through several key features:
• Deploys data-driven customer acquisition: Advanced analytics will uncover early adopters, raise the conversion ratios, and lower acquisition costs.
• Standardized product offering: To make solar easier to understand, homeowners will be presented with only 1 or 2 configurations of system sizing and financing options.
• Accessible financing options for customers: Lease financing would allow homeowners to experience solar without incurring high upfront costs.
• Access to debt financing by minimizing off-taker risk: To provide comfort to debt financiers, the proponent intends to reduce the payback period to 3-5 years (even if the lease tenure is longer). In addition, third-party credit assessment of off-takers
and stringent lease agreements will further reduce default rates.
• The instrument plans to install 250 projects of 5 KW each during the pilot in Kota, Rajasthan by 2019. This would mobilize US$ 1 million and save up to 1600 tons of carbon emissions.
• At scale, the instrument has the potential to install 5 KW projects for 20,000 households. This would mobilize US$ 75 million and abate 130,000 tons of carbon emissions by 2022.
• If the business model were to be replicated by other companies, the instrument could account for 500 MW of installed capacity by 2022, enough to power 100,000 homes, abating 640,000 tons of CO2.
By scaling a standard solar leasing model, the proponent will generate revenues through monthly payments made by its customers. These revenues will be used to service loan repayments and meet operational expenses. The residual cashflows will be either reinvested or given back to shareholders. The Rooftop Solar Accelerator’s interaction with different stakeholders is depicted in the instrument mechanics graphic. In addition to the leasing model – which is relatively new to India – this instrument differs from other attempts to unlock rooftop solar in several important ways:
• It introduces an analytic-driven framework for customer acquisition and credit evaluation. Data will be leveraged to segment customers based on income levels, appliance ownership, education, awareness levels, profession etc.
• It will ensure standardization to generate operational efficiencies within the leasing model, while making it easier for customers to decide. Homeowners will be presented with only 1 or 2 configurations of system sizing and financing options.
• The entire sales cycle will be managed through a mobile app, which will further ease the training process and optimize the sales cycles.
News & Events
Investors launch new financial instruments for low-carbon transit, sustainable land use, and clean energy in developing countriesSeptember 27, 2018
New York, 27 Sept 2018 – The Lab – an investor-led initiative that aims to drive billions of dollars for climate action by developing and supporting innovative finance instruments – has launched its 2018 class of nine new investment vehicles. Over 30 high-level Lab members from governments, private investors, philanthropies, and development finance institutions convened […]
The Lab’s 2018 class of nine innovative vehicles for sustainable investment makes progress towards launchMay 30, 2018
Nine new early-stage investment vehicles that aim to drive millions to clean energy, low-carbon transit, and sustainable land use in developing countries, continue to make progress towards launch. The investment vehicles comprise the Lab’s 2018 class, selected at the start of 2018 from a pool of over 100 crowd-sourced, competitive ideas to mobilize needed investment […]
The Lab picks top finance instruments for action on climate change in developing countries, particularly Brazil, India, and in Sub-Saharan AfricaFebruary 14, 2018
LONDON — The Lab – a public-private initiative composed of experts in sustainable investment from governments, development finance institutions, and the private sector – has picked a new class of investment vehicles to drive much-needed finance to low-carbon, climate-resilient global development, out of over 100 ideas submitted into a competitive pool. The nine new instruments […]