Decentralised Solar Energy and India’s Energy Transition

Context

India emerged as the world’s second-largest contributor to solar capacity additions in 2025 after China, with solar energy accounting for nearly 30% of its installed electricity capacity. Despite this progress, flagship decentralised solar initiatives such as PM Surya Ghar Yojana and PM-KUSUM continue to lag behind their targets, highlighting important policy and implementation challenges.

Major Decentralised Solar Schemes

PM Surya Ghar Yojana

1. Aims to install rooftop solar systems in one crore households.
2. Provides financial assistance to support rooftop solar installations.
3. Seeks to reduce household dependence on conventional grid electricity and promote clean energy generation.

PM-KUSUM

1. Promotes solar-powered irrigation and decentralised renewable energy generation in the agricultural sector.
2. Supports installation of solar pumps and small solar plants on unused or underutilised land.
3. Enables farmers to lower energy costs and earn additional income through the sale of surplus electricity.

Current Status

1. The two schemes have achieved only a fraction of the targeted 40 GW decentralised solar capacity, indicating a significant implementation gap.
2. PM-KUSUM has recorded relatively better progress in the deployment of standalone solar pumps.
3. Rooftop solar installations remain concentrated in a few states, reflecting substantial regional disparities.
4. State-level electricity pricing and subsidy policies have played a decisive role in determining scheme outcomes.

Impact of Electricity Subsidies on Solar Deployment

A major constraint to decentralised solar expansion is the widespread availability of free or heavily subsidised electricity.

Key Issues

1. Consumers have little incentive to invest in solar systems when electricity is available at negligible cost.
2. The upfront expenditure on solar installations remains a significant barrier.
3. The financial gains from rooftop solar decline when electricity bills are already minimal.
4. States with extensive electricity subsidies have generally witnessed lower participation in decentralised solar programmes.

This creates a policy paradox where subsidies designed to improve affordability inadvertently weaken incentives for renewable energy deployment.

Policy Measures to Improve Participation

Several states have sought to address this challenge by supplementing central assistance with additional financial support.

Emerging Approaches

1. Providing state-level incentives to reduce installation costs.
2. Expanding financial assistance for households and farmers.
3. Promoting one-time asset creation in place of recurring consumption subsidies.

Potential Benefits

1. Encourages wider deployment of decentralised solar systems.
2. Reduces the burden of upfront investment.
3. Lowers future subsidy liabilities for state governments.
4. Promotes long-term energy self-reliance and sustainability.

Importance of Decentralised Solar Energy

1. Supporting India’s Energy Transition

1. Contributes to India’s target of achieving 500 GW of non-fossil fuel capacity by 2030.
2. Expands renewable energy generation beyond utility-scale projects.

2. Efficient Land Utilisation

1. Utilises rooftops and existing agricultural land.
2. Reduces pressure on land acquisition for large solar parks.

3. Strengthening Energy Security

1. Enhances local power generation capacity.
2. Reduces transmission losses and dependence on centralised infrastructure.

4. Improving Grid Stability

1. Distributed generation reduces pressure on the electricity grid.
2. Helps meet peak electricity demand more effectively.

5. Enhancing Climate Resilience

1. Supports electricity supply during periods of extreme weather and rising demand.
2. Reduces vulnerability arising from climate-related stress on conventional energy systems.

6. Reducing Fiscal Burden

1. Can gradually reduce dependence on recurring electricity subsidies.
2. Replaces long-term consumption subsidies with productive energy assets.
3. Supports a transition towards sustainable and self-generating energy systems.

Challenges and Way Forward

Conclusion

The experience of PM Surya Ghar Yojana and PM-KUSUM illustrates how policy incentives shape renewable energy outcomes. Moving from consumption-based subsidies to asset-based support, while improving affordability and implementation, will be critical for expanding decentralised solar energy and achieving India’s long-term energy transition and climate goals.