By Karan Sharma
Distributed solar has emerged as a key component of India’s renewable energy portfolio, enabling decentralised generation across rooftops, farms and industries. Unlike centralised solar parks, distributed systems operate close to consumers, reducing transmission losses and enhancing energy independence. The sector has grown rapidly owing to supportive policies, cost reductions and growing consumer demand. According to the Ministry of New and Renewable Energy (MNRE), India’s total off-grid and rooftop solar capacity stood at around 5,399.51 MW and 21,522.75 MW, respectively, as of September 2025.
This market primarily covers three segments: residential rooftop systems, agricultural solar applications, and commercial and industrial (C&I) projects. Renewable Watch examines the current status of these segments, key challenges and the future outlook for distributed solar in India…
Residential rooftop solar
The residential rooftop solar market has grown from being a niche solution for early adopters to becoming a mainstream option under government support schemes. According to the MNRE, India added 4.59 GW of rooftop solar capacity in 2024, a 53 per cent increase over 2023. The country’s cumulative rooftop capacity has surpassed 20 GW. Policy interventions and financial subsidies have been instrumental in accelerating adoption. A key initiative has been the launch of the PM Surya Ghar: Muft Bijli Yojana (PMSGY) in February 2024, with a total outlay of Rs 750.21 billion. The scheme targets the installation of rooftop solar in 10 million households with a cumulative capacity of 30 GW by 2026-27.
The financial structure under the PMSGY is designed to make small-scale rooftop systems affordable. For systems up to 2 kW, the central subsidy covers 60 per cent of benchmark costs, while for systems between 2 kW and 3 kW, the subsidy is 40 per cent, capped at 3 kW per household. This translates into Rs 30,000 for a 1 kW system, Rs 60,000 for a 2 kW system and Rs 78,000 for systems of 3 kW or higher. The subsidy is transferred directly to beneficiaries, avoiding intermediaries. Applicants can register through a national portal that provides vendor ratings, guidance on system sizes and information on expected benefits. As of October 2025, more than 1.693 million homes have adopted rooftop solar under the PMSGY, with 6.369,652 applications received on the national portal
State-level progress
Distributed solar adoption varies significantly across states. Gujarat (457,939), Maharashtra (313,262), Uttar Pradesh (255,089), Kerala (151,904) and Rajasthan (90,719) have recorded the maximum number of installations under the PMSGY, as of October 2025, as per the PMSGY portal. Andhra Pradesh has received the highest number of applications at 1.433 million.
Chandigarh achieved 100 per cent rooftop coverage in government housing, installing 6,627 systems that generate 23.5 MUs annually. Tamil Nadu set a 2.5 million installation target, while Delhi introduced an additional Rs 30,000 subsidy in March 2025 for 230,000 systems over three years. In July 2025, Delhi further revised its solar policy to offer Rs 10,000 per kW up to Rs 30,000 per consumer for systems up to 3 kW. In October 2025, Maharashtra launched the Swayampurna Maharashtra Residential Roof Top (SMART) solar scheme to offer subsidies of up to 95 per cent for rooftop solar panel installations for select consumer categories (BPL, Scheduled Caste and Scheduled Tribe households with monthly electricity consumption of up to 100 units), to help them reduce their power bills to near zero. These initiatives are expected to accelerate uptake and make payback periods shorter for households, further complementing central support.
However, uptake remains limited in regions with low household consumption. In Bengaluru, where households often consume less than 200 units per month, the financial case for rooftop solar is weak. Similarly, in Punjab, Tamil Nadu and Delhi, free electricity provided to households up to certain thresholds reduces the incentive for households to invest in solar.
Agricultural solar
This segment has also expanded significantly, supported by government subsidies. PM-KUSUM, a key policy for the uptake of decentralised agricultural solar, consists of three components. Component A supports decentralised solar plants of 0.5-2 MW on agricultural land, with power sold to discoms at pre-fixed tariffs. Component B provides subsidies for off-grid solar pumps, typically up to 7.5 HP (extendable up to 15 HP in select areas), under a cost-sharing pattern of 30 per cent central financial assistance (CFA), 30 per cent state support and the remaining 40 per cent from farmers. Farmers availing of bank finance typically pay only 10 per cent upfront. Component C focuses on on-site solarisation: individual pump solarisation (IPS), allowing farmers to install solar capacity of up to twice their pump capacity for self-consumption and grid export, and feeder-level solarisation (FLS), which solarises entire agricultural feeders supplying multiple farmers to ensure uniform daytime supply.
As per the MNRE, as of September 30, 2025, Maharashtra (1,762.68 MW), Haryana (1,080.64 MW), Rajasthan (805.45 MW) and Chhattisgarh (390.73 MW) together account for roughly 74.81 per cent of installations. Progress, however, remains uneven, both across states and components. As per the PM-KUSUM portal, as of September 2025, Component A has recorded 650.49 MW of installed capacity out of 10,000 MW sanctioned, a 6.5 per cent completion. Component B has recorded 903,444 pumps installed out of 1,272,758 sanctioned, a 70.98 per cent achievement. Under Component C (IPS), 10,063 pump sets have been solarised out of 60,828 sanctioned, roughly 16.54 per cent completion, whereas under Component C (FLS), 908,863 feeders have been solarised out of 3,561,855 sanctioned, achieving about 25.52 per cent completion. Between 2019-20 and 2024-25 (up to December 2024), CFA disbursed for solar irrigation under PM-KUSUM stood at around Rs 44,050 million. These figures show the greatest traction in standalone pump deployment under Component B, while large-scale decentralised plants (Component A) and on-site/feeder-level solarisation (Component C) continue to lag.
In recent months, states such as Madhya Pradesh, Telangana and Andhra Pradesh have shown consistent momentum. In June 2025, Madhya Pradesh Urja Vikas Nigam invited bids for the development of 1.2 GW of solar projects under the feeder solarisation component of the Surya Mitra Krishi Feeders programme. In July 2025, Telangana Renewable Energy Development Corporation Limited floated a tender under PM-KUSUM Component C (IPS) to solarise grid-connected pump sets across 81 villages. The tender invited bids for 7.5 kW ground-mounted solar systems, with a cumulative target of 126.3 MW across 16,840 pumps. In August 2025, Andhra Pradesh announced an accelerated plan to solarise agricultural power within a year, targeting 293,000 pump sets and a cumulative capacity of about 1,162.8 MW under PM-KUSUM. In August 2025, Maharashtra State Electricity Board Solar Agro Power invited bids to procure 1.6 GW of decentralised solar projects under the Mukhyamantri Saur Krushi Vahini Yojana 2.0.
C&I distributed solar
For C&I consumers, distributed solar has become both a cost-driven and a compliance-driven necessity. At Renewable Watch’s 18th Annual Conference on “Solar Power in India”, several C&I developers highlighted that with high grid tariffs and tightening environmental, social and governance requirements, C&I consumers are increasingly adopting rooftop, on-site and open access solar projects. They also noted that C&I clients are fragmented and logistically constrained, with variable daily loads and limited space availability. These factors have increased the role of battery storage in stabilising fluctuations and managing outages.
To address these issues, several regulatory initiatives have been taken in the C&I space. In October 2025, the Ministry of Power urged states to eliminate separate net metering agreements and instead adopt a digital net metering agreement, while advising them to waive application, registration, testing and commissioning fees for rooftop systems. In the same month, the Rajasthan Electricity Regulatory Commission introduced virtual net metering and group net metering arrangements. These developments are expected to enable large-scale aggregation and market integration of C&I solar projects.
Challenges and the future outlook
Despite rapid growth and policy support, the distributed solar segment continues to face several constraints. In the residential solar space, concerns over system quality have undermined consumer confidence. Further, even after subsidies, many consumers are unwilling to give up their rooftop space for solar systems.
In the agricultural solar segment, financial barriers persist. Although subsidies reduce upfront costs, small farmers operating pumps below 3 HP remain excluded from the benefits. Notably, nearly 85 per cent of Indian farmers fall in this category.
In the C&I segment, policy misalignment between the central and state governments often complicates deployment. Discoms, facing revenue losses as high-paying consumers shift to self-generation, introduce additional charges to limit uptake. For instance, TANGEDCO in Tamil Nadu levies Rs 120-Rs 130 per kW as networking charges for rooftop consumers, while Andhra Pradesh and Haryana impose grid support charges on open access and rooftop projects.
Technical and operational challenges also persist. Batteries remain expensive, insurance penetration is limited, and rural systems are vulnerable to theft, vandalism and poor telecom connectivity. In the agricultural solar segment, the low operating costs of solar pumps risk encouraging the over-extraction of groundwater.
The outlook remains conditional yet promising. The PMSGY’s 30 GW target by 2026-27 and the PM-KUSUM scheme’s focus on agricultural solar pumps, despite delays and repeated deadline extensions, still provide a platform for mainstreaming decentralised renewable power generation. To further increase the adoption of distributed solar in the country and complement the aforementioned schemes, measures such as standardisation of design and installation practices, expansion of financing models for low-income households and smallholders, integration of storage solutions, and strengthening of insurance mechanisms are needed.
