The government has launched a landmark scheme for the rooftop solar segment – PM-Surya Ghar: Muft Bijli Yojana. The scheme, with a total outlay of Rs 750 billion until 2025-26, aims to provide free electricity up to 300 units every month to 10 million households across the country. The scheme has received an overwhelming response, with over 10 million registrations within one month of its launch in February 2024. Earlier this year, the government also waived the feasibility study mandate for rooftop solar systems up to 10 kW and sanctioned updated benchmarks for central financial assistance (CFA) under the rooftop solar programme.
Until now, the rooftop solar segment has lacked momentum and capacity addition has been slow. The government’s recent policy measures are an attempt to extend support and create an enabling ecosystem for the rooftop solar segment, playing a significant role in meeting the country’s energy transition goals.
Progress so far
As of February 2024, the country’s grid-connected rooftop solar capacity stood at 11.08 GW or 14.6 per cent of the installed solar capacity, with commercial and institutional consumer premises accounting for the largest share. The residential segment holds a very small share in this capacity (around 3 GW). The rooftop solar programme initially aimed for an installed capacity of 40 GW by 2022, with an installed rooftop solar capacity of only 8.1 GW. The timeline for the programme has now been extended till March 2026.
Among the states, Gujarat is on top, with the highest installed capacity of 2,898 MW, followed by Maharashtra with 1,716 MW, Karnataka with 1,562 MW, Rajasthan with 1,002 MW and Kerala with 512 MW. These states collectively account for more than half of the total rooftop solar PV installations in the country (as of February 2024). The capacity addition in these states has been supported by a facilitating policy and regulatory framework, subsidies and net metering.
PM-Surya Ghar: Muft Bijli Yojana
The PM-Surya Ghar: Muft Bijli Yojana has an outlay of Rs 750.21 billion until 2025-26. Under the scheme, a CFA of 60 per cent of the system cost will be provided for 2 kW systems while 40 per cent of the additional cost will be covered for systems of 2-3 kW capacities. The CFA will be capped at 3 kW. At current benchmark prices, this translates into a minimum subsidy of Rs 30,000 for a 1 kW rooftop solar system. Meanwhile, for 2 kW and 3 kW rooftop systems, the subsidies will be Rs 60,000 and Rs 78,000 respectively. Households will have access to collateral-free low-interest loans at around 7 per cent for installing residential rooftop solar systems up to 3 kW.
In order to operationalise the scheme, the government has assigned state-wise responsibilities to eight central public sector undertakings (CPSUs) to implement the scheme in 10 million households as renewable energy service companies (RESCOs). REC Limited has been appointed as the central implementing agency, which will monitor and coordinate the progress made by CPSUs. While households can install solar rooftop systems under the new scheme and claim subsidy, low-income households will be provided rooftop solar systems by the CPSUs. In their case, the subsidy will go to the CPSU for installing the system and the remaining funding will be covered through loans by the CPSU. Once the solar power system is installed, a low-income household can get up to 300 units of free electricity every month through the power generated on their rooftops. Ownership of the rooftop solar system will be transferred to the consumers once the loan is repaid and they will continue to generate revenue through the sale of surplus electricity.
The scheme will help households save on electricity bills and earn additional income through the sale of surplus power to discoms. A 3 kW system will be able to generate more than 300 units a month on average for a household. The scheme aims to add 30 GW of solar capacity through rooftop installations in the residential sector, generating 1,000 BUs of electricity and resulting in the reduction of 720 million tonnes of CO2 equivalent emissions over the 25-year lifetime of rooftop systems.
Other initiatives for rooftop solar
In January 2024, the Ministry of New and Renewable Energy sanctioned updated benchmarks for CFA under the rooftop solar programme. For 1-3 kW capacity individual household projects, the updated CFA is Rs 18,000-Rs 20,000 per kW. Meanwhile, projects in the 3-10 kW range have adjusted rates of Rs 9,000-Rs 10,000 per kW. For resident welfare associations or group housing societies and common facilities for projects up to 500 kW, the CFA has been updated to Rs 9,000-Rs 10,000 per kW.
In the same month, the power ministry incorporated enabling provisions in the electricity consumer rules to accelerate rooftop solar development in the country. Under the amended rules, while solar rooftop PV systems of up to 10 kW capacity have been exempted from the requirement of technical feasibility study, the timeline for completing the feasibility study has been reduced from 20 days to 15 days for systems of more than 10 kW capacity.
The way forward
While the PM-Surya Ghar: Muft Bijli Yojana is expected to accelerate the uptake of residential rooftop solar systems, reduce household electricity cost and strengthen the grid, some additional measures as well as clarity on the implementation procedure of the scheme may be required to give an impetus to the segment. While CPSUs have been assigned as RESCOs to set up the projects, there may still be some resistance from the discoms as they perceive a threat to their current business model from the growing adoption of distributed solar. Apart from this, in order to benefit from the large-scale deployment envisaged under the scheme, centralised bulk procurement could be implemented to leverage economies of scale. Overall, the enthusiastic participation of local stakeholders to develop a supporting ecosystem is essential for the success of the scheme.
Furthermore, major roadblocks hindering the growth of the rooftop solar market in India need attention. These include policy and regulatory issues, such as inconsistent net metering policies, green open access rules, imposition of duties, access to timely disbursement of subsidies, and financing, which continues to be a major challenge for the rooftop solar market.
India’s renewable energy targets require the rooftop solar segment to catch up. The country has a huge untapped rooftop solar potential, especially in the residential segment. A report by the Council on Energy, Environment and Water indicates that more than 250 million households throughout India could potentially utilise 637 GW of solar energy capacity on their rooftops. Additionally, the report highlights that harnessing just one-third of this overall solar technical potential would be sufficient to meet the entire electricity demand of the country’s residential sector, amounting to approximately 310 TWh.
Overall, the successful implementation of the recently announced policy measures can invigorate the rooftop solar segment. This, coupled with increased consumer awareness and streamlining of approval processes, could catalyse capacity addition in the segment
