Anushruti Singh
India’s solar energy market is expanding faster than anticipated, with projections indicating that solar electricity generation will reach 104.59 billion kWh by 2025. According to PS Market Research, the industry is set to grow at a 13.4 per cent CAGR, reaching $24.9 billion by 2030.
While solar energy is now the cheapest source of electricity for Indian enterprises, SMEs face hurdles in adoption, such as high upfront costs, financing barriers, and policy limitations. In this exclusive interview, Damian Miller, Co-founder & CEO of Orb Energy, discusses how businesses can overcome these challenges, leverage financing solutions, and why solar is no longer just an option but a necessity for SMEs in India.
Edited Excerpts:
In your opinion, how would you assess Indian enterprises’ embrace of solar energy? Is it necessary to speed up?
There has been a sea change in the way that Indian enterprises now see solar energy. Almost every proprietor and every industrialist now realises that solar is the least-cost electricity available to them in India and are keen to use as much of it as they can. We can still speed it up, but the awareness levels among SMEs that solar is a ‘no-brainer’ for their business are now phenomenal.
What are the primary challenges SMEs in India face when transitioning to solar energy?
SME owners have a lot on their plate with limited bandwidth and resources to handle all the challenges their core businesses might face. Therefore, when faced with an opportunity to invest in solar, though they ‘know’ it makes financial sense, it might not be the right time, or they might not have the right resources to make a quick decision to adopt solar. There usually is quite a long sales cycle associated with an SME owner deciding to invest in solar. Consequently, solar is not competing with other sources of electricity; it’s competing with SME owners’ ability to focus on solar, identifying their preferred vendor, figuring out how to finance it, and then investing in it.
High upfront costs deter many small businesses from adopting solar energy. What can they do, and what innovative solutions or models can make solar systems more affordable?
The up-front costs of solar are definitely a challenge, but please note that the cost of solar has fallen about 40 times since we started Orb Energy. Solar is now very affordable and within the reach of all SMEs. Of course, finance can still be helpful to a lot of SME owners in alleviating the up-front costs. This is why Orb Energy is totally unique as a solar manufacturer in having its own in-house finance facility for SMEs to purchase a solar system with zero down payment and zero collateral required. Our in-house finance facility has been operational now for more than 7 years and has disbursed more than 300 crores in financing to SMEs. The key point again is that we don’t require any collateral or down payment from the SME, and our approval process is FAST. This stands in stark contrast to the banks, where approval processes can drag on and on and where SMEs need to divert resources for a down payment and collateral.
How do you perceive the effectiveness of current government subsidies and incentives for solar energy adoption among MSMEs?
There are no capital subsidies for SMEs to invest in solar. The natural unsubsidised payback is amazing at 2-3 years. Remember, a solar panel is warrantied for 25 years, so after payback, SME owners basically get free electricity from solar for the next 22–23 years! The only two incentives that an SME owner can access are: 1) net metering, and 2) 40 per cent accelerated depreciation. Net metering originated in India under the first National Solar Mission and was a game changer for Indian industry.
Basically, this means that an SME owner can bank all the solar power they generate in a month and offset it against their use of electricity that month. If they generate a surplus, then the discom must pay them for that electricity. The other incentive is the accelerated depreciation benefit, which allows SMEs to derive a tax benefit from their investment in a rooftop or ground-mounted solar system.
What policy changes would you recommend encouraging wider adoption?
It used to be that an investment by an Indian enterprise in solar would attract 100 per cent accelerated depreciation. Over the years, this has been reduced to just 40 per cent. My suggestion is not that all companies should get 100 per cent accelerated depreciation, but that the Government of India could support the SME sector of India by just allowing SMEs to get the benefit of 100 per cent accelerated depreciation.
I think there is a real case for recognising that SMEs face more difficult challenges than large corporations and deserve additional support when it comes to making an investment in solar that supports their bottom line and also helps the nation to reduce its dependence on fossil fuels while speeding up the overall energy transition.
Technological advancements have reduced solar installation costs globally. How is Orb Energy leveraging these advancements to make solar energy more cost-effective for SMEs in India?
When we started Orb Energy, the cost of a solar panel was 40 times more than it is today, according to global wholesale prices. That’s already a huge drop, and it has brought solar within the reach of every SME in India today, if they have access to the right finance solution. To ensure that our customers benefit from such rapid cost declines, we have invested in manufacturing our own solar panels and have continually upgraded to keep pace with technological change.
Today, the highest-efficiency modules in the market are called TOPcon solar panels, and we manufacture those in-house in Bengaluru. We also have big plans in the coming financial year to further upgrade and expand our manufacturing plant to keep up with the growth in the market, and SME demand in particular.
Is limited awareness about the long-term benefits of solar energy still a challenge?
No, I don’t think awareness is still an issue for SME owners. The fact that solar is now the lowest-cost electricity available in India is known far and wide among SMEs. That said, I think where awareness might be lacking is about the importance of ensuring your system is a high-quality system, with particular attention paid to critical components.
Here we see too many SME owners sacrificing quality for the sake of small differences in price. Given a rooftop solar system is intended to provide a minimum of 25 years of power from your rooftop as per warranty terms, it is important that SME owners not sacrifice quality for the sake of limited short-term price savings. We have seen way too many examples of buyer’s remorse when SME owners go with lower quality systems or with lower quality providers of rooftop solar.
What trends do you foresee in the solar energy sector for SMEs?
The biggest trend that I see is that some larger SMEs are no longer content to generate solar from their rooftops. Now, under the highly innovative and visionary policies adopted by the country—known as Open Access—SMEs can also benefit from off-site solar in addition to rooftop solar. This means that an SME can go beyond the amount of solar power that their rooftop can generate. This is particularly important for SMEs with big power needs—think all SMEs that use electric furnaces.
At Orb Energy, we have come up with a completely unique model where SMEs can own a portion of a solar park that we set up, like our 30 MW solar park in Arsikere, Karnataka. We sold 2.5 megawatt solar arrays to 12 SMEs that needed much more power than their rooftops would allow.
What’s more, we not only sell the solar array, but we also sell the land under the solar array, and our SME customers love that! They also love that with our approach to off-site ground-mounted solar, they get to keep the accelerated depreciation.
We are now significantly expanding this part of our business, and we are seeing a broad trend across the solar industry and the SME sector about serving SMEs with both rooftop solar and off-site ground-mounted solutions parallelly.
