In this country of tropical sunshine, solar power largely continues to be produced in the remote deserts of Rajasthan and Gujarat in western India, from where it journeys to key demand centres in cities – namely, homes, offices, Small and Medium Enterprises (SMEs), and commercial establishments.

Cities like Delhi, Bengaluru, Ahmedabad, Pune, Lucknow, and Hyderabad are all major consumers of solar power. City rooftops – right above the heads of consumers – have major potential, but most public policy support, financing mechanisms, and infrastructure planning continue to focus on far-flung solar parks.

Ankita Luharuka, CEO, Alliance City Developers, told The Secretariat that viewing cities simply as consumers has left a major resource underutilised. “Indian cities possess vast rooftop space capable of supporting significant solar generation. Yet rooftop solar has frequently been viewed as an optional sustainability feature rather than a core element of urban infrastructure,” she said.

Recognising the importance of decentralised generation, the Union government launched PM Surya Ghar: Muft Bijli Yojana in 2024. It aims to install rooftop solar systems in one crore households by March 2027. While the deadline is not far, so far 40 lakh households have registered.

India had over 150 gigawatts (GW) of solar energy installation capacity as of March 31 this year, according to the Ministry of New and Renewable Energy (MNRE). But rooftop solar accounted for only 17% of that, at 25.73 GW. Around 110.43 GW came from ground-mounted utility-scale projects. The rest came from agricultural solar units under the KUSUM scheme and off-grid projects.

India's official clean energy target is to achieve 500 GW of non-fossil fuel-based electricity capacity by 2030.

The Rooftop Policy 

The PM Surya Ghar scheme has an outlay of ₹75,021 crore and marks the most ambitious attempt yet to move solar generation closer to consumers.

It provides Central Financial Assistance (CFA) for residential rooftop solar installations at the rate of 60% of the benchmark cost for systems up to 2 kW and 40% of the additional cost for systems between 2 kW and 3 kW, with the subsidy capped at 3 kW.

This translates into a subsidy of ₹30,000 for a 1-kW system, ₹60,000 for a 2-kW system, and ₹78,000 for a 3-kW system or higher. In addition, beneficiaries can avail of collateral-free concessional loans for rooftop solar installations.

Instead of treating citizens only as consumers of electricity, the scheme seeks to transform them into producers. However, rooftop deployment remains far below the scale needed to alter the structure of India's solar market.

Why Solar Parks Are Preferred

There are several reasons why India’s policymakers chose scale over proximity in the first place.

Solar parks are easier to execute. A single project can add hundreds of megawatts of capacity in one go. Central and state governments need to coordinate with just a few developers instead of millions of households. Banks also find it easier to finance large projects rather than fund thousands of small rooftops spread across cities.

Since 2014, the Centre has supported solar parks through dedicated schemes, covering land aggregation, transmission connectivity, and common infrastructure. Rooftop solar, by contrast, has largely depended on individual consumer decisions, local approvals, and access to financing.

Raman Chopra, CEO and Whole-Time Director, Caparo Power Limited, a joint venture with Finland-based energy major, Wartsila, which supplies uninterrupted power in Bawal, Haryana, said solar parks became the preferred model because they simplified every stage of project development.

“A solar park offers a single land parcel, a single interconnection point, a single creditworthy off-taker, and clean price discovery through reverse auctions,” he told The Secretariat.

The Choice For Financiers

A utility-scale solar project usually comes with a long-term Power Purchase Agreement (PPA), predictable revenue streams, and a clearly identifiable asset. Rooftop solar offers none of those advantages. Every installation involves a separate customer, a separate roof, and a separate payment risk.

Abhishek Srivastava, General Partner, Kae Capital, said the issue is not whether rooftop solar makes economic sense but whether the investment can be packaged efficiently.

“A utility-scale project is a single 25-year PPA with a creditworthy counterparty and predictable cash flows. Rooftop solar is the opposite. The diligence cost per megawatt is dramatically higher, and exits are harder because the asset base is fragmented,” he said.

He said lenders can securitise a 300-Megawatt (MW) park, but they struggle to price a portfolio of 3,000 rooftops where the counterparty is an SME or a housing society. Add to that the discom problem - net metering rules change from state to state and sometimes year to year -and the result is regulatory uncertainty on top of credit fragmentation.

So, investors are not being irrational.

He, however, pointed out that the unit economics of rooftop solar can actually be better, as it reduces transmission cost. The lifetime average cost per unit for rooftop solar is ₹2.5-₹4, whereas the respective figure for solar parks is ₹6-₹15.

“But, until someone solves aggregation and standardisation at scale, capital will keep defaulting to utility-scale,” Srivastava said.

Cost Of Transmission

Large projects continue to dominate capacity additions. Yet the policy preference for solar parks comes with costs that are often absent from the headline tariff numbers.

Electricity generated in remote solar parks must be transmitted across long distances. That requires transmission corridors, substations, and balancing infrastructure. As renewable penetration rises, grid operators must also manage intermittency and demand fluctuations across a wider geographical area.

Chopra says the low tariffs associated with solar parks do not always capture the full cost of delivering electricity to consumers. This tariff refers to the contracted price at which solar park developers sell electricity to state-owned grid operators; the current lowest price in the country is ₹2 per unit. But by the time it reaches the consumer, this cost goes up.

“The lowest busbar price in the country can still be the most expensive electron once you have paid to deliver and store it,” said Chopra.

India thus simultaneously invests billions of rupees in transmission infrastructure to take renewable power from resource-rich states to demand centres in cities.

The Rooftop Challenge

Utilities have concerns that rooftop solar could weaken their finances by reducing electricity purchases from high-paying consumers.

But Chopra argues that the issue is more complex. He says the real challenge emerges when consumers generate a significant portion of their own electricity while remaining connected to the grid for backup power.

In such cases, utilities continue to maintain network capacity but recover only a smaller share of costs through electricity sales.

Another challenge lies in how cities are planned.

India’s cities have traditionally been designed around consumption rather than production. Building regulations focus on land use, density, and mobility, while energy generation is treated as an external function supplied through the grid.

The broader issue is that India's renewable energy policy still rewards gigawatts more than system efficiency.

A two GW solar park is easy to count. It appears immediately in national capacity statistics. Rooftop solar delivers different benefits — lower transmission losses, reduced pressure on urban grids, consumer participation and greater energy resilience- but these advantages are harder to capture in official capacity numbers.

India’s solar policy spent the last decade searching for land. The next phase of the energy transition may depend on recognising that some of the country’s most valuable solar real estate already exists - on millions of roofs across its cities and towns.’