PMSGY Launch Marks Major Step for India’s Solar Ambitions

The launch of the Pradhan Mantri Surya Ghar Yojana (PMSGY) is set to propel India’s solar energy capacity forward, with a recent report from the Institute for Energy Economics and Financial Analysis (IEEFA) and JMK Research & Analysis indicating an expected increase in rooftop solar capacity of over 50% in just six months.

Unveiled by the central government in February 2024, PMSGY comes with a substantial financial outlay of INR 75,021 crore. The scheme aims to provide enhanced subsidy support for residential consumers adopting rooftop solar systems, with the ambitious target of installing 30 GW of capacity across 10 million households within three years.

According to the report, PMSGY has already achieved significant milestones, garnering 13 million registrations and 1.8 million applications in its first six months. This has led to 385,000 installations, contributing approximately 1.8 GW of new capacity. At the time of the program’s launch, residential installations comprised just 3.2 GW or 27% of India’s total rooftop solar capacity. To meet the target of 30 GW by 2027, 8-10 GW will need to be added annually.

Vibhuti Garg, Director – South Asia at IEEFA, emphasized the importance of the decentralized energy market, stating, “The growth of this sector, with rooftop solar as a critical component, will be essential for achieving energy independence and security.” The PMSGY aims to contribute significantly to India’s overarching renewable energy goal of 500 GW by 2030.

The report also highlights a critical development in addressing financing challenges that have historically hindered residential rooftop solar installations. The number of financial institutions participating in this sector has surged from a few to over 25, including major private and public sector banks, non-banking financial institutions (NBFCs), and fintech companies.

“Greater financial incentives, more financing options, and better access to capital are some of the key factors driving the strong initial response to the PMSGY,” stated Jyoti Gulia, founder of JMK Research. Many financiers are now forming industry-wide partnerships with project-executing entities and equipment suppliers, offering a streamlined solution for rooftop solar consumers, ensuring reliability in supply chains and improved cost dynamics.

PMSGY has also increased the central financial assistance (CFA) for systems below 3 kilowatt-peak (kWp) capacity and integrated with the National Portal for Rooftop Solar (NPRS), enhancing the digitized experience for consumers.

Despite the positive developments, challenges persist. Policy inconsistencies between states, such as local network charges and potential subsidy removals, along with technical issues linked to the NPRS integration, continue to present hurdles. Prabhakar Sharma, Senior Consultant at JMK Research, noted the difficulties arising from varying regulations across states and their interpretations by state distribution companies (DISCOMs).

The report further underscores concerns about the supply-side support for domestically manufactured solar modules. With India’s photovoltaic (PV) cell manufacturing capacity at just over 8 GW, which falls short of annual solar demand, a shortage of domestic content requirement (DCR) modules is anticipated, particularly in the residential sector.

Nevertheless, stakeholders assert that there has never been a better time to invest in rooftop solar, driven by declining solar module prices, strong government support, and comprehensive financing solutions available to consumers.

Gaurav Upadhyay, Energy Finance Analyst – India Sustainable Finance at IEEFA, summarized the potential impact, stating, “Adoption of residential rooftop solar is a ‘win-win’ scenario, resulting in significant savings for consumers and state distribution companies (DISCOMs).”

As the initiative unfolds, the successful realization of rooftop solar potential will rely on collaboration among all market stakeholders, including regulators, distributors, financiers, engineering, procurement and construction (EPC) companies, developers, and consumers, to cultivate a robust decentralized energy ecosystem in India.