India’s accelerating energy demand and urbanization have intensified the need for clean, reliable power. Projections indicate that, under current policies, India’s energy consumption could double by 2040 and electricity demand could triple (IEA, 2020) by y 2050. Over 814 million people are expected to live in cities, further amplifying electricity requirements and straining infrastructure. At the same time, severe air pollution has emerged as a critical domestic challenge that threatens sustainable development. In response, India has launched aggressive solar targets including achieving 500 GW of non-fossil capacity by 2030 and specific rooftop solar (RTS) goals (Shah, 2024). This article reviews recent policy initiatives (notably the PM Surya Ghar scheme), supporting finance, system advantages, and remaining obstacles for India’s rooftop solar expansion, drawing on current analyses and data.
Government Support and Financial Incentives
In early 2024, the Government of India approved “PM Surya Ghar: Muft Bijli Yojana” (Free Electricity for Homes Scheme) with a total outlay of ₹75,021 crore, to be implemented by 2026-27. This scheme offers cash subsidies to residential consumers for installing rooftop photovoltaic (PV) systems up to 3 kW. Under the program, households receive a 60% subsidy on solar unit cost for systems up to 2 kW, and 40% subsidy on the additional cost for systems between 2-3 kW, capping support at 3 kW. At current benchmark prices, this translates to roughly ₹30,000 per kW for a 1 kW system, ₹60,000 for 2 kW, and ₹78,000 for 3 kW. (Tyagi et al., 2024) These incentives make rooftop installations far more affordable for homeowners and are expected to spur uptake in one million rural and urban households. The scheme implementation involves central and state agencies and requires DISCOMs to facilitate net-metering, inspections, and timely commissioning of systems.
In parallel, the Asian Development Bank (ADB) approved a $240.5 million loan on July 17, 2024 to support India’s Solar Rooftop Investment Program (tranches 2 and 3). This financing, distributed through the State Bank of India (SBI) and NABARD, focuses on residential solar projects. The ADB notes that rooftop systems generate power “close to consumption points”, reducing long-distance transmission losses and easing the operational burden on the distribution network. By improving energy independence and reducing grid strain, these investments also contribute to fewer power disruptions. The loan (partly from ADB’s Clean Technology Fund) aligns with India’s goal of 50% non-fossil generation by 2030 and explicitly supports the Surya Ghar program. (Sarangi & Taghizadeh-Hesary, 2021)
These central schemes are reinforced by state-level policies and international aid. For example, state governments have offered additional capital subsidies (e.g. 70% subsidy in special category states) and duty exemptions to residential installers (Tyagi et al., 2024). International bodies like the World Bank, NDB, and Germany’s KfW have previously provided loans and concessional finance for rooftop programs. Such support underpins rapid growth: in 2023 India had deployed over 84 GW of renewable capacity (mostly utility-scale), while ambitious targets like 40 GW rooftop by 2022 were set (IEA, 2020; Sarangi et al., 2020). However, as discussed below, meeting these targets requires addressing persisting barriers.
Technical Advantages of Rooftop Solar
Rooftop solar (RTS) systems differ from utility-scale PV in key ways. Their modularity means systems can be custom-sized for any rooftop, from tiny 1 kW units for homes to larger arrays for factories. This flexibility allows stand-alone, grid-connected, or hybrid configurations suited to local needs (Sarangi et al., 2020). Crucially, RTS requires no additional land; it utilizes existing roof space. Given India’s acute land scarcity and slow, state-by-state land acquisition (often taking 6-9 months), this is a major advantage (Sarangi et al., 2020). In other words, RTS is “less demanding in terms of land,” fitting neatly into densely populated areas where large solar farms are impractical.
Cost considerations also favor rooftop solar for certain consumers. Retail tariffs for commercial and industrial (C&I) customers in India typically range from ₹6-11/kWh, whereas studies estimate rooftop PV’s levelized cost (LCOE) at roughly ₹3-5/kWh. This substantial cost advantage makes solar highly attractive to businesses and institutions, driving up rooftop adoption in the C&I sector. As a result, C&I consumers often see payback periods of 3-4 years on their rooftop investments. Even residential consumers benefit from electricity bill savings when tariffs rise. Additionally, because RTS generates power near the load, it reduces transmission and distribution losses. In aggregate, rooftop generation can save energy that would otherwise be lost, benefiting DISCOMs by reducing their need to procure or transmit expensive power.
RTS also aids grid management. Distributed PV can shave peak daytime load on central stations, helping DISCOMs meet Renewable Purchase Obligations and defer costly infrastructure upgrades. It can improve local supply reliability, since consumers essentially generate their own power close to point-of-use. In rural areas with weak grids, even small solar systems can power micro-enterprises, boost productivity, and support livelihoods
Deployment Targets and Potential
The Government’s original target of 40 GW rooftop capacity by 2022 was ambitious. This goal was based on estimates of roughly 42.8 GW potential (NISE) and a broader survey by TERI suggesting up to 124 GW market potential under ideal conditions. In practice, progress has lagged; by March 2019 only ~4.4 GW was installed (Shah, 2024)
To track state-level progress, the government launched the State Rooftop Solar Attractiveness Index (SARAL) for 2018-19. SARAL evaluates states on policy ambition, implementation environment, investment climate, consumer experience, and ecosystem (GoI, 2019). For example, Karnataka, Telangana, Gujarat, and Andhra Pradesh scored highest (A++ category), while states like Bihar and West Bengal scored poorly. This index helps identify best practices and areas needing reform.
Challenges and Barriers
Despite strong support, rooftop solar faces multiple hurdles. In several states, schemes give households a fixed number of free power units each month (e.g. 200-300 kWh free). Consumers receiving free or heavily subsidized electricity see little incentive to invest in solar. Studies report installers being asked “why spend on solar when electricity is free?” (Mercom, 2025). In fact, in states like Punjab or Delhi, free power programs have dampened solar interest, as families fear losing their subsidy or simply don’t value long-term savings. These programs also financially strain DISCOMs (losing revenue) and complicate rational net-metering. Many homes lack adequate rooftop area or face shading and structural issues. Small or uneven terraces, multi-storey apartments, and rental/tenant dwellings can’t easily host panels. Safety concerns (vandalism, theft) also deter installations. Such space constraints make it hard to scale up the <2 kW segment for which subsidies exist. DISCOMs effectively act as unpaid storage: they absorb surplus daytime solar and deliver grid power at night. This cash-flow mismatch worsens DISCOM losses and can make them reluctant participants.
India does not mandate battery storage with rooftop PV. Without storage, surplus solar power during midday cannot be stored for evening use, exacerbating the “duck curve” problem. In other words, solar oversupply midday drives net load down, then demand suddenly rises as solar ebbs, forcing thermal plants to ramp up sharply. Analysts warn that the absence of distributed storage “compounds” this grid-integration issue. Emerging studies urge policies to pair solar with batteries or time-of-day tariffs to smooth demand. Homeowners often struggle to assess the quality of solar products and installers. Reports of substandard panels, poor inverters, or dubious vendor practices are common. The complexity of paperwork and subsidy applications further discourages many from completing projects. Lack of awareness about financing options (loans, subsidies) and long-term benefits also limits adoption.
Addressing these challenges requires coordinated policy action: aligning free-power schemes with solar incentives, deploying robust storage and demand-response, reforming net-metering, and streamlining registration/subsidy processes (Tyagi et al., 2024).
Business and Implementation Models
In India the CAPEX model dominates rooftop solar. Here, consumers (residential or commercial) buy and own the solar system outright, often with bank loans, and claim government subsidies. Consumers bear operation/maintenance risks but enjoy all the long-term benefits. Approximately 90% of installed RTS capacity in India follows this model. Its advantages include fast payback and full ownership, but it exposes homeowners to high upfront cost and subsidy-disbursement delays. It also means extra exported energy is banked in the grid under net metering. International experience shows CAPEX models can scale quickly with low-cost finance: Germany’s rooftop solar boom was fueled by cheap loans and subsidies under a CAPEX approach.
On the demand side, utilities and states can also drive adoption through mandates and incentives. One proposed intervention is to mandate solarisation of government buildings. State agencies could require new and existing public buildings to install rooftop PV consistent with national building codes. Such mandates increase the visibility of solar technology and build public trust. Mandating solar in schools, hospitals, and government housing can raise awareness and acceptance of rooftop PV technology.
Equally important is facilitating new business models. Experts recommend enabling community or cooperative solar, where multiple users share a single system, and peer-to-peer (P2P) energy trading within local microgrids. Regulations for virtual net metering and rooftop aggregators can unlock solar for renters and those without suitable roofs. In fact, CEEW highlights that states should “enact regulations to enable innovative business models (community solar, P2P)” complementing central schemes. Developing a central registry of rooftop systems and standardized installation timelines (as suggested by Tyagi et al., 2024) could also streamline growth.
Finally, a coherent policy mix is vital. Subsidies, mandate-based standards, net-metering reforms, and awareness programs must work in concert. Studies stress that public support schemes should be continuously evaluated and fine-tuned to local conditions (e.g. adjusting subsidies if tariff levels change). For example, tying rooftop incentives to time-of-day tariffs or storage adoption could align rooftop generation with grid needs. As one expert review notes, integrating state and national interventions in a synchronized way is key to scaling up RTS.
Through a balanced policy portfolio that aligns incentives for consumers, DISCOMs, and regulators, India can accelerate rooftop solar deployment and move closer to its clean energy goals.
References
Council on Energy, Environment and Water. (2024). How are Solar Policies Enabling Indian Rooftop Solar Programmes? Issue Brief. https://www.ceew.in/publications/how-indian-states-are-enabling-rooftop-solar-adoption-with-solar-policies-and-regulations
International Energy Agency. (2020). India 2020 – Analysis. IEA. https://www.iea.org/reports/india-2020
Mercom India. (2025). Free Electricity Programs a Disincentive for PM Surya Ghar Rooftop Solar Adoption. Mercom India (Arjun Joshi, March 21, 2025).
Policy Circle. (2025). Solar Energy: India’s Power Grid Faces New Risks from RE Surge. (May 28, 2025). https://www.policycircle.org/policy/power-grid-solar-energy-surge/
Sarangi, S., & Taghizadeh-Hesary, F. (2020). Rooftop solar development in India: Measuring policies and mapping business models. ADBI Working Paper 1256. Asian Development Bank Institute. https://www.adb.org/sites/default/files/publication/697186/adbi-wp1256.pdf
Tyagi, B., Bagui, D., & Jena, A. (2024). Key Insights and Policy Recommendations: Accelerating Rooftop Solar Deployment in India. CEEW Issue Brief (Sept. 2024).
Shah, N. (2024). A Study of Pradhan Mantri Surya Ghar Yojna and Its Impact on Household Electricity Costs and Decreasing Dependency on Conventional Energy Sources. IJFMR240528845, 6(5). https://www.ijfmr.com/papers/2024/5/28845.pdf
IEA. (2020). India 2020 – Analysis. IEA.
https://energyconsortium.org/wp-content/uploads/2025/01/EC-Working-Paper-1.pdf
Reuters. (2015, April 15). India’s urban population to rise to 814 million by 2050. Reuters. https://www.reuters.com/article/technology/india-builds-first-smart-city-as-urban-population-swells-idUSL4N0XB3XU/