India’s residential rooftop solar capacity as of 31 March 2022 may only be a mere 2,010 megawatt (MW). But because of a rising need for cost savings and increasing awareness among consumers, it is expected that the residential solar rooftop installations to rapidly accelerate in the coming years. By the end of fiscal year 2023, it is expected that the cumulative residential rooftop solar capacity will reach 3,214MW, nearly a 60% year-on-year increase...

India has more than 300 million households and is endowed with abundant sunshine almost throughout the year, with an annual average of 300 sunny days. This shows that the potential for rooftop solar installations in residential spaces is huge in India. However, currently, India’s cumulative residential rooftop solar market is nowhere near its full potential.

The share of the residential rooftop solar segment in the overall electricity generation capacity of the country is minuscule. This is because the penetration of solar photovoltaic (PV) technology in the residential segment has been shallow, unlike many developed economies, such as Australia, where about 25% of all Australian households have rooftop PV systems. The key drivers for the greater penetration of rooftop solar in the residential segment of advanced countries include high retail electricity costs, low solar power costs, attractive and effective government incentives, etc.

India began making dedicated efforts toward adopting solar power with the National Solar Mission (NSM) launch in January 2010, initially known as the Jawaharlal Nehru National Solar Mission. The NSM is the umbrella initiative to promote solar power in India. Under this mission, the central government provided financial assistance (subsidies) to set up solar PV plants on residential rooftops. Along with this initiative, some states also introduced their own rooftop solar subsidies for the residential segment, over and above the central subsidies.

In February 2019, the centre set an official target to install 4 gigawatts (GW) of cumulative residential rooftop solar capacity by 2022. However, even the availability of government subsidies could not provide the desired impetus for the growth of this segment. Thus, the pace of rooftop solar adoption in the residential segment has been abysmal across different states (except Gujarat, which happens to be the best example of widespread residential rooftop solar adoption). The lack of consumer awareness had been one of the major impediments to adoption, especially in the pre-COVID-19 era. Post-COVID-19, there has been a strong surge in demand, backed by enhanced consciousness about cost savings, the environment, etc.

Interestingly, while the pace of the solarisation of India’s residential segment has been underwhelming, India has been the world’s least expensive residential solar power market for about a decade. In 2020, the average cost of a residential rooftop solar system in India was US$658 per kilowatt (kW), declining by 73% from the 2013 level.1 In comparison, in 2020, the residential rooftop solar cost in leading residential markets, such as Japan, the United Kingdom, Switzerland and the United States of America (the US), was 3.3x to 6.4x that of India.

Residential Rooftop Solar Market Overview

Despite the high cost-effectiveness of residential rooftop solar systems in India, the market remains vastly underdeveloped. This section establishes this reality by elaborating on the installation trends and the business models relevant to the residential market.

Installation Trends

As of fiscal year (FY) 2022, India’s overall rooftop solar market reached a cumulative installed capacity of 11,770MW. Of this, the residential segment has a share of just 17% (2,010MW), while the Commercial and Industrial (C&I) segment has the majority share of 66% (7,715MW).

From FY2019 to FY2022, the residential segment grew at a compound annual growth rate (CAGR) of 90%. This trend of cumulative installations is mainly due to the rooftop solar boom in Gujarat, especially over the past three fiscal years. As of FY2022, Gujarat holds the lion’s share, 61% (1,227MW), of India’s cumulative residential segment capacity. We provide more details on the state’s residential rooftop solar progress in the “Success stories” section.

Figure 2. Cumulative Installed Capacity Trends: Residential Rooftop Solar
Source: JMK Research Note: The above figure indicates the trend for overall (subsidised and non-subsidised) residential installation. The cumulative subsidised capacity, as of FY2022, was ~1.3GW

While the growth of the pan-India market has been dismal so far, we expect it to accelerate in the near term because of the strong policy push and resurgent market demand. By FY2023, JMK Research estimates that the residential rooftop solar market will most likely achieve 3,214MW of cumulative installed capacity.

Business Models

For a high-growth trajectory, it is necessary to nurture and augment the market demand, which requires stable and effective business models. Typically, business models are classified based on ownership. Capital expenditure (CAPEX) and operational expenditure (OPEX) models are the two traditional modes of business in the overall rooftop solar market.

Between these two models, CAPEX has been the most prevalent choice in the Indian residential segment. In the CAPEX model, the customer pays upfront for the system cost and thus wholly owns the solar plant. The responsibility of undertaking O&M of the system also lies with the customer.

In the OPEX model {also known as the Renewable Energy Services Company (RESCO)}, a third party, i.e., a RESCO, provides 100% capital for setting up the solar system. The RESCO sets up, operates and maintains the system and sells the generated electricity to the customer at a pre-determined tariff.

However, the RESCO model barely exists in the residential market, with only a few instances involving group housing societies/residential welfare associations (GHS/RWA). This is due to the high contractual and payment risks that project developers face because of the lack of creditworthy consumers.

The Equated Monthly Instalment (EMI) model is a variation of the CAPEX, requiring partial to zero upfront investment and EMIs or monthly pay-outs from the customer at a later stage. This model is slowly gaining relevance in the residential market.

We compare the commercial aspects of the three business models in Table 1.

These three business models have been predominantly implemented, keeping consumers at the core of the models. This consumer-centric approach is standard, and DISCOMs do not directly facilitate them. However, there do exist a few cases of a DISCOM-centric approach. For more details about this approach, see the ‘Way forward’ section.

The traditional, CAPEX-based rooftop systems have seen sluggish adoption in the residential segment despite strong government initiatives from the central as well as various state governments.

Key Players

Healthy growth prospects supported by surging consumer demand are inducing the strong development of the supply side of the residential market. However, the Indian supply side, as it stands, is hugely underserving the market. There is a significant dearth of high-quality solar equipment, operation and maintenance (O&M) services, performance guarantees, etc.

In addition, the supply base for the Indian residential rooftop solar market is highly fragmented. In the whole set of supply-side players, there are many low- to mid- sized vendors and just a handful of top-tier developers. The latter group includes companies such as Tata Power, Amplus Solar, Solar Square and Zunroof. These players provide high-performance solar systems with performance guarantees and comprehensive maintenance packages, and well-trained, qualified technicians deliver their services.

Among the top-tier players, the most reputed brand is Tata Power, which has commissioned 100-150MW of residential solar systems across India.2 There are two key reasons for Tata Power’s commendable achievement in the residential segment:

  • One-stop shop: Tata Power offers a one-stop solution for residential rooftop solar installation. It caters to consumer needs by bundling and providing all the relevant services, ranging from financing to engineering, procurement and construction (EPC) to O&M.
  • Strong Distributor network: Being one of India’s oldest solar power players, Tata Power has a strong pan-India presence and is present in more than 100 cities in India. The company also has a strong distributorship base with over 250 channel partners across the country.

The residential market is also strongly referral-driven. Therefore, prompt after-sales support services for end consumers are also imperative. Furthermore, it is necessary for the players to offer scalable business solutions for them to accelerate their growth in the residential market.

Key Market Drivers

The two fundamental drivers for the residential market are the availability of government subsidies and the prospect of savings on electricity bills through rooftop solar power. Other indirect catalysts, such as low reliability of retail power from the grid and rising consumer awareness, are also helping push the residential rooftop solar market forward.

Prospect of Savings in Electricity Bill

Rooftop solar customers in the residential segment can achieve considerable annual cost savings (about 25% or more) on their electricity bills. Also, for some states, the cost of consuming power (in per kilowatt-hour (kWh) terms) generated from residential rooftop solar systems is substantially lower than procuring grid-based power from the local DISCOM. In fact, the gap between the two costs of power has only widened over recent years because of the general deflationary nature of the cost of solar power and the rising average cost of supply for DISCOMs.

Grid tariffs for residential consumers are likely to become more expensive going forward. This would enhance the economic case for adopting rooftop solar plants.

Lack of Reliability of the Retail Electricity Supply

The reliability of retail power supply continues to be a severe challenge in India. Though it has a surplus power generation capacity, India lacks the necessary infrastructure to maintain a brown fuel supply chain and power Transmission and Distribution (T&D). Many of the population living in semi-urban and rural areas of the country still face frequent power outages and/or voltage fluctuations. The lack of stability of the power distribution network in these areas has been a compelling factor behind the adoption of rooftop solar in the residential segment.

In the second quarter of 2022, the health of the entire Indian electricity network deteriorated in light of various atypical occurrences. The daily electricity deficit in India rose from an average of 0.3% to 1%.3 The key factors leading to this unwarranted situation are higher than usual temperatures across India, the resurgence of industrial activities (leading to increased demand), and an acute shortage of coal (leading to a reduced power supply).

This power crisis has inadvertently underscored the significance of renewable electricity supply in India, especially onsite ones. As a result, we expect the residential rooftop solar market to grow faster in the foreseeable future.

Imposition of Regulatory Mandates

Some administrative authorities in India have implemented regulations that mandate the installation of solar PV systems on the rooftops of residential buildings. These authorities sought to take this encouraging step to provide a fillip to the growth of solar installations in their respective jurisdictions.


At the municipality level, the Municipal Corporation of Karimnagar was one of the first corporations to pass a resolution requiring all houses, apartments, community halls and commercial establishments with a built-up area of more than 2,700 square feet to install rooftop solar plants. From 1 March 2019, new buildings falling in this category needed to make provisions for solar rooftop panels before availing construction permits. Buildings constructed before this date also had to install solar panels.

Union Territories

Among the Union Territories (UTs), Chandigarh, in a notification issued on 18 May 2016, made the installation of rooftop solar power plants mandatory in residential units measuring 500 square yards and more and in group housing societies.

However, the regulation was not very effective as the response from households was low due to several bureaucratic bottlenecks.


At the state level, the West Bengal government made it mandatory for all large housing societies (having a total contract demand of more than 500kW) to install solar rooftop systems to meet at least 1.5% of their total electrical load.

Another state that formalised mandatory rooftop solar plant installations for residential buildings is Haryana. It is now mandatory for all residential buildings with a plot size of 500 square yards or more to install a solar power plant.

Extension of World Bank Credit Line

In the post-COVID-19 era, the most notable update in the Indian residential rooftop solar financing sphere has been the sanctioning of the World Bank’s first concessional rooftop solar financing programme for the residential market in India. The World Bank has been one of the primary lending supports for this market, specifically the C&I segment.

In June 2022, the World Bank extended a fresh credit line of US$165 million to the Indian rooftop solar market to be channelled exclusively to the residential market.

Reportedly, the concessional financing programme will directly finance 450MW of residential rooftop solar systems. It intends to incentivise DISCOMs to engage directly with residential consumers to bolster capacity building in the respective segment.

Broadly, the fund would aid in financing certain DISCOM-side measures, including the identification of:

  • Groups of residential customers
  • Optimal locations for solar rooftop systems and battery energy storage systems (BESS)
  • Appropriate business practices that would help the DISCOMs in expediting rooftop solar installation.

Government Initiatives

At the Central Level

Under the NSM, in December 2015, the Ministry of New and Renewable Energy (MNRE) launched “Phase 1” of the Grid-Connected Rooftop and Small Solar Power Plants Programme. The aim was to install 4.2GW of rooftop solar plants in the country by 2020. In March 2016, as part of this programme, the MNRE introduced the first-ever incentive for the residential segment.4

As formally named, the incentive, or central financial assistance (CFA), was also extended to the social and institutional segments. The amount of CFA was determined based on benchmark costs and the category of states (see Table 2).

As set by the MNRE, the benchmark costs covered all the system costs (including costs of solar modules, inverters, balance of system, etc.) except the costs of net metering and battery back-up.

               …To be continued  

  1. IRENA. Renewable Power Generation Costs in 2020. June 2021.
  2. Insight from primary research.
  3. Fitch Ratings. India to Face Supply Challenges, Rising Electricity Demand. April 2022.
  4. MNRE. Grid Connected Rooftop and Small Solar Power Plants Programme – Amendment. March 2016.

Jyoti Gulia is the Founder of JMK Research and has about 16 years of rich experience in the Indian renewable sector. Her core expertise includes policy and regulatory advocacy, assessing market trends, and advising companies on their business strategy.

Akhil Thayillam is a Senior Research Associate at JMK Research. A renewable sector enthusiast, he has experience in tracking new sector trends as well as policy and regulatory

Prabhakar Sharma is a Senior Research Associate at JMK Research with expertise in tracking the renewable energy and the battery storage sector. Previously, he worked with Amplus Solar.

Vibhuti Garg is an Energy Economist and the Director, South Asia, IEEFA. She has advised private and public sector clients on commercial and market entry strategies, investment
diligence on power projects and the impact of power sector performance on state finances. She also works on international energy governance, energy transition, energy access,
reallocation of fossil fuel subsidy expenditure to clean energy, energy pricing and tariff reforms.

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