Over 70 pc MSMEs uninformed of rooftop solar options: Deloitte and CIF report

A new report by Climate Investment Funds (CIF) and Deloitte has indicated that scaling up rooftop solar technologies in the MSME sector is facing issues such as a lack of low cost financing, inadequate level of awareness, and lack of rooftop aggregation models.

The report also noted that MSMEs will have to compete with larger entities with better credit profiles to adopt rooftop solar. It contained findings from a study which attempted to explain the slow growth and low investment in the solar rooftop space by MSMEs.

The study surveyed 150 MSMEs across six identified clusters (rubber and plastic, pharmaceuticals, auto, paper, food and beverage, textiles), and looked at the following parameters:

1. Key barriers for upscaling to solar rooftops in MSMEs
2. Ways to overcome these barriers
3. Suitable financial instruments to cater to MSMEs' lender needs

Here are some major findings from the study:

The level of awareness about rooftop solar was very low amongst the survey sample. More than 70 percent of MSMEs in the paper, textiles, plastics, and pharma sectors said they were not informed of rooftop schemes.

Further, in the textiles, plastics, pharma, food processing and auto industries, more than 88 percent of MSMEs said they were not informed of financing options for the same. Additionally, many high-power consuming SMEs were hesitant to install rooftop solar because of the perceived performance risks.

MSMEs also found it challenging to meet collateral requirements as their plant and machinery were already committed to other term loans. Most of these MSMEs were from the fragmented textiles and plastics clusters. However, most mid-size MSMEs reported facing no major challenges in obtaining loans.

Ownership was not a barrier for the implementation of rooftop solar. More than 90 percent of MSMEs were the owners of the physical property/building out of which the company was being run. Therefore, ownership issues are not expected to pose any significant barrier to the implementation of rooftop solar in the surveyed cluster.

Almost 50 percent of the MSMEs had connected load in the range of 50−200 kW, while in most cases, the rooftop solar potential was less than 50 percent of the connected load. This implies that entire solar generation can be fully absorbed at such MSMEs.

Most MSMEs spent either between five percent and 10 percent or between 10 percent and 20 percent of their operating income on electricity. The share of electricity cost in the overall operating expenses was determined largely by the nature of industry and cost of other raw materials.

Additionally, MSMEs preferred public and private banks for lending. However, the MSMEs expressed a willingness to work with any institution that could offer the most attractive financial terms.

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