Decentralised Solar Power in India: Why Subsidies Are Slowing Household Solar Adoption

Why in News?

India is rapidly expanding its renewable energy capacity, especially solar power. However, the adoption of decentralised solar power through schemes such as PM Surya Ghar Yojana and PM-KUSUM remains below its full potential.

A major reason is that many States already provide free or highly subsidised electricity to households and farmers. As a result, people have less incentive to spend money on rooftop solar panels or solar pumps.

What is Decentralised Solar Power?

Decentralised solar power means electricity generated close to the place where it is used.

Examples include:

• Rooftop solar panels on houses
• Solar pumps used by farmers
• Small solar plants on farmers’ unused land
• Local solar systems connected to the grid

In simple terms, instead of producing all electricity in large solar parks and sending it through long transmission lines, decentralised solar allows households and farmers to become energy producers.

India’s Solar Growth

• India has made strong progress in solar energy.
• Solar power now accounts for nearly 30% of India’s total installed electricity capacity. India added more than 50 GW of solar energy capacity in the last two years. In 2025, India added more solar capacity than any country except China.
• This shows that solar energy is becoming central to India’s clean energy transition.

PM Surya Ghar Yojana

PM Surya Ghar Yojana aims to install rooftop solar units on one crore households.

Main features:

• Rooftop solar support for households
• Free electricity up to 300 units per month
• Cash subsidy for solar equipment
• Encouragement to produce electricity locally
• Reduction in household electricity bills

The scheme is important for urban and semi-urban households.

PM-KUSUM Scheme

PM-KUSUM stands for Pradhan Mantri Kisan Urja Suraksha Evam Utthan Mahabhiyan.

It is aimed at farmers.

Main features:

• Support for small solar plants on unused land
• Installation of standalone solar water pumps
• Grid-connected solar pumps
• Reduction in diesel and electricity use
• Additional income by selling solar electricity
• Support for irrigation needs

The scheme helps farmers become both electricity consumers and producers.

Progress and Gaps

• PM Surya Ghar Yojana and PM-KUSUM have led to around 13 GW of decentralised solar capacity.
• However, the target is around 40 GW by the end of the current financial year. This shows that progress is still below expectation.
• The most successful part of PM-KUSUM has been standalone solar water pumps. More than 10.9 lakh solar pumps have been installed against a target of 14 lakh.
• But progress is uneven across States.

Better-performing States under rooftop solar include:

• Gujarat
• Maharashtra
• Uttar Pradesh
• Kerala
• Rajasthan

These five States account for nearly 70% of rooftop installations.

Why Power Subsidies Slow Solar Adoption

Power subsidies are one of the main reasons for low adoption in some States.

Many State governments provide:

• Free electricity to households
• Highly subsidised domestic power
• Free agricultural power for irrigation pumps

When electricity is already free or very cheap, people do not feel the need to invest in solar equipment.

For example, if a household already gets free electricity, rooftop solar does not appear financially attractive because:

• Solar installation has high upfront cost
• Recovery of investment takes time
• Savings are low when grid electricity is already cheap
• Excess solar power sale may not be enough to attract consumers

The same problem affects farmers under PM-KUSUM. If agricultural power is already free, farmers may not prefer solar pumps unless additional incentives are given.

Examples from States

Punjab

Punjab provides 300 units of free electricity to domestic consumers every month and completely free power for agricultural tubewells. It also spends heavily on power subsidies. As a result, adoption of solar schemes has remained low.

Tamil Nadu, Karnataka and Delhi

These States also have subsidy structures that reduce the financial attraction of rooftop solar.

Gujarat, Kerala and Maharashtra

These States have relatively higher electricity tariffs for some consumers. Therefore, rooftop solar becomes more attractive because households can save more money.

Importance of Decentralised Solar Power

1. Reduces Pressure on Land

Large solar parks require huge land areas. Finding land is becoming difficult. Rooftop and local solar systems reduce pressure on land.

2. Reduces Power Subsidy Burden

If households generate their own electricity, governments may save money on recurring electricity subsidies.

3. Supports Farmers

Solar pumps can reduce dependence on diesel and unreliable grid power. Farmers can also earn by selling surplus electricity.

4. Helps During Peak Demand

Summer electricity demand is rising due to heatwaves and cooling needs. Solar power is useful during daytime peak demand.

5. Climate Resilience

Decentralised solar can reduce stress on the grid during high-demand periods and improve energy security.

6. Supports Clean Energy Transition

It reduces dependence on fossil fuel-based electricity and helps India meet climate goals.

Link with Heat and Power Demand

• India’s electricity demand is rising sharply during hot months. Earlier, hydropower helped meet additional summer demand, but large hydropower capacity has stagnated.
• In recent peak demand periods, especially during April and May, solar power played a major role in meeting daytime demand.
• In years of low rainfall and high temperatures, decentralised solar becomes more important because:
• Hydropower generation may be affected.
• Cooling demand rises.
• Grid pressure increases.
• Local solar generation can support households and farms.

Challenges

• High upfront cost of rooftop solar systems.
• Free or subsidised grid electricity reduces consumer interest.
• Lack of awareness among households and farmers.
• Uneven progress across States.
• Delays in subsidy disbursal and approvals.
• Net metering and grid connection issues.
• Quality concerns in equipment and installation.
• Limited access to easy credit.
• Need for maintenance support.

Way Forward

• Provide targeted upfront support for poor and middle-class households.
• Offer easy loans and EMI-based solar models.
• Simplify rooftop solar approvals and net metering.
• Encourage States to give one-time solar incentives instead of recurring electricity subsidies.
• Promote solar pumps in areas dependent on diesel irrigation.
• Create local maintenance and repair networks.
• Improve awareness through panchayats, DISCOMs and farmer groups.
• Link solar adoption with reduction in State subsidy burden.
• Promote domestic solar manufacturing.
• Use decentralised solar as part of heatwave and peak demand planning.

Conclusion

Decentralised solar power is essential for India’s clean energy transition. It can reduce dependence on large solar parks, lower power subsidy burdens, support farmers, and help meet rising summer electricity demand. However, free and highly subsidised grid electricity has reduced the financial attraction of rooftop solar and solar pumps in many States. The solution lies in shifting from recurring electricity subsidies to smart, one-time solar incentives. This can make households and farmers energy producers while supporting India’s long-term renewable energy goals.