This month, the rooftop solar scheme under the PM-Surya Ghar: Muft Bijli Yojana is marking the second anniversary of its launch.

The scheme targeted covering at least one crore households with an outlay of ₹75,021 crore. Consumers get up to 300 units of free electricity monthly and subsidies of up to ₹78,000 for 3 kW systems. A review of the scheme’s performance reveals both healthy growth and a few execution bottlenecks.

First off, the transition has been swift. According to Shreya Mishra, CEO and Co-founder of Solar Square, the market has grown from about 8,000 monthly residential solar installations in 2021, to about 2 lakh units last month. The company has made 40,000 installations and manages them too.

Mishra points out that a single national web portal for consumer permits and the integration of distribution services for every State has helped quicken adoption. Additionally, the move to make net metering a legal right in 2020 has helped consumers feed surplus power back to the grid at no extra cost or opportunity loss, she says. Earlier, in some states, the units feeding the State’s grid from rooftop installations yielded revenue lower than the cost of the same quantity of power drawn from the grid. That was seen as unfair to consumers.

However, sector-wide adoption could have been faster in the absence of bottlenecks. According to a December report by the Institute for Energy Economics and Financial Analysis (IEEFA), only 22.7 per cent of applications translated into installations, indicating hurdles in the areas of financing, vendor capacity, and approvals.

The report shows that progress has been uneven across states. Gujarat leads with installed capacity of 1,491 megawatt (MW), followed by Maharashtra, Uttar Pradesh, Kerala, and Rajasthan. The five states together account for nearly three-fourth of the total capacity installed under the scheme.

According to data discussed recently in the Rajya Sabha, installations countrywide have crossed 26 lakh units, with close to ₹15,000 crore released from the allocated amount. The road to the targeted one crore solar homes by the end of financial year 2027 remains long, says IEEFA.

Financing needs

Upfront cost is still a challenge for consumers. While bank financing for installations is cheaper than personal loans, the process is cumbersome. Asked if the companies could ally with financial institutions to facilitate loan approvals at the customer’s doorstep, Mishra says, “Solar Square does have tie-ups with banks for financing but commercial banks still mandate a branch visit as the process is yet to be digitised.” While non-banking finance firms offer 20-minute approvals via a digital process, the interest rates are higher.

To qualify for the subsidy, the solar panels and the cell in them must be made in India. Says Mishra, “This helps reduce dependence on Chinese parts.” But won’t cheaper Chinese panels offset the government subsidy offered for the highest kilowatt category? “No, the subsidy is greater than the cost differential for an imported panel,” says Mishra.

Despite the challenges, Mishra strikes an optimistic note, as demand for electricity grows on par with economic growth. “In recent times, electricity growth has often exceeded economic growth rates. So, if we have to meet our 2047 GDP targets, power demand is going to spike. And shifting part of the capacity from the national grid to household roofs is a good way to achieve those targets.”

The next step needed in the rooftop solar journey would be battery storage, though the technology is yet to mature for residential storage. According to a NITI Aayog report recently, “India’s power sector transition is ... fundamentally capital-intensive. Cumulative investment requirements reach approximately $8.79 trillion in current policy scenario and $14.23 trillion in net-zero scenario by 2070.” So, as rooftop solar picks up pace, homes and factories will feed the grid during the day, and draw at night. Mishra says this grid load would be unsustainable over time.

The Aayog’s report says, “Rooftop solar systems across homes, offices, and factories are emerging as an effective solution to land acquisition constraints [and] reducing pressure on transmission networks.” So, subsidies for residential battery storage would help avoid destabilising the grid, according to Mishra.

She says the market is rich with potential. “In Australia, 40 per cent homes have solar, the US has 8 per cent penetration and Germany has 12 per cent. Considering India has only about 30 lakh homes with rooftop solar, it’s just 1 per cent out of a potential 26 crore homes.”

Published on February 16, 2026