Expanding Solar Power Access Under The PM Surya Ghar Muft Bijli Yojana (2024)

Policy Update
Shivashish Narayan

Background

India, one of the world’s fastest-growing economies, has experienced a rapid increase in energy demand over the past few decades. The country faces the dual challenge of providing reliable energy access to its vast and diverse population while reducing its dependence on fossil fuels, contributing to environmental pollution and climate change. In November 2015 our PM Narendra Modi proposed the International Solar Alliance which aims to promote solar power utilisation on a global scale, encouraging member countries to adopt solar energy as a means to achieve sustainable and low-carbon growth.

To address these challenges, the Indian government has strongly committed to expanding its renewable energy capacity. This commitment is reflected in ambitious targets as announced at COP26, of achieving 500 GW of renewable energy by 2030 and reducing the carbon intensity of the economy. Solar energy plays a crucial role in these plans due to its abundant availability across the country and declining technology costs.

As of February 28, 2023, India’s renewable energy capacity has reached 168.96 GW, demonstrating significant progress towards sustainable power generation. This total includes 64.38 GW from solar power, 51.79 GW from hydropower, 42.02 GW from wind power, and 10.77 GW from biopower. This ongoing expansion highlights India’s commitment to enhancing its renewable energy portfolio and reducing its carbon footprint. To encourage citizens of India to start switching to renewable energy, the central government came up with a scheme called Pradhanmantri Suryodaya Yojana now known as PM Surya Ghar Muft Bijli Yojana.

Functioning

Prime Minister Narendra Modi has launched the PM Surya Ghar Muft Bijli Yojana, a transformative initiative aimed at providing up to 300 units of free electricity each month to one crore households for rooftop solar installations. The scheme, which was approved by the Union Cabinet on February 29, 2024, involves a significant investment of ₹75,021 crore. Officially introduced on February 13, 2024, this central scheme underscores the government’s dedication to expanding renewable energy access and reducing electricity costs for millions of Indian families.

Under this Scheme, the government offers substantial subsidies to encourage the adoption of rooftop solar systems. For solar units up to 2 kW capacity, households can receive a subsidy covering 60% of the installation cost. For systems ranging from 2 to 3 kW, the subsidy covers 40% of the additional cost beyond 2 kW. This subsidy support is capped at a system capacity of 3 kW. Based on current benchmark prices, this translates to a subsidy of ₹30,000 for a 1 kW system, ₹60,000 for a 2 kW system and ₹78,000 for systems of 3 kW or higher.

Eligibility criteria for the PM Surya Ghar Muft Bijli Yojana include the following:

Indian Citizenship: The applicant must be a citizen of India.
Home Ownership: The applicant must own a home with a roof suitable for installing solar panels.
Valid Electricity Connection: The household must have an active and valid electricity connection.
No Prior Solar Subsidy: The household should not have previously received any other government subsidy for solar panel installations.

The PM Surya Ghar Muft Bijli Yojana is a comprehensive scheme with a total financial outlay of ₹75,021 crore, planned for implementation until FY 2026-27. A significant portion, ₹65,700 crore, is allocated as Central Financial Assistance (CFA) for residential households to support the installation of rooftop solar systems. In addition, provisions have been made for essential program components such as Capacity Building, Awareness and Outreach, and Service Charges, each receiving 1% of the CFA, amounting to ₹657 crore per component. The administrative approval for the scheme was granted on March 16, 2024, as per Order No. 318/17/2024-Grid Connected Rooftop.

The financial structure of the scheme is detailed as follows:

CFA to Residential Consumers: ₹65,700 crore
Incentives for Distribution Companies (Discoms): ₹4,950 crore
Development of Model Solar Villages: ₹800 crore, to establish a model solar village in each district.
Incentives for Local Bodies: ₹1,000 crore
Payment Security Mechanism: ₹100 crore to ensure financial stability and support for the program.
Innovative Projects: ₹500 crore to foster new and creative solar energy initiatives.
Capacity Building: ₹657 crore to enhance skills and capabilities related to the program’s implementation.
Awareness & Outreach: ₹657 crore to promote public understanding and engagement with the scheme.
Service Charges: ₹657 crore to cover operational and administrative costs.

These allocations reflect a holistic approach to advancing solar energy adoption, ensuring widespread participation, and supporting various stakeholders involved in the transition to renewable energy.

The implementation of the PM Surya Ghar Muft Bijli Yojana is facilitated through the National Portal, offering a streamlined process for consumers installing rooftop solar systems. Consumers who finance the installation either through their funds or with the assistance of a bank loan and make upfront payments directly to a registered Rooftop Solar (RTS) vendor will have their projects classified under the capex mode.

All requests for Central Financial Assistance (CFA) must be submitted via the National Portal. To support consumers, Distribution Companies (DISCOMs) will assist with the application and installation process. They will establish designated helpdesks at all field offices to aid in navigating the portal and addressing any concerns during the installation. Residential consumers have the freedom to negotiate and enter into agreements with RTS vendors at mutually agreed rates without the need for state DISCOMs or agencies to conduct tendering or rate discovery to empanel vendors.

For the release of CFA, applications must meet several requirements:

Unique Application ID and Consumer Account Number (CAN): Applications must be uploaded to the National Portal (https://pmsuryaghar.gov.in) with the consumer’s valid Electricity Consumer Account Number. The portal will then assign a unique application ID.
GPS-Tagged Photographs: Pre-installation and completed installation photos, including geo-coordinates, must be uploaded as specified in Annexure II of the guidelines.
Meter Installation and Agreement: After the rooftop installation is completed, the meter must be installed by the DISCOM, and the metering agreement between the DISCOM and the consumer must be uploaded to the portal. The CFA will only be processed once the DISCOM verifies the system, the necessary agreements are signed, and the installation is commissioned. For non-metered grid-connected systems, such as battery hybrid systems, the DISCOM will inspect and note remarks in the report.
DISCOM Report (DR): A digital DR will be filled out by the DISCOM representative and generated through the National Portal, as per the format in Annexure IV of the guidelines.
Bank Account Details: Consumers must provide bank account information along with verification documents like a cancelled cheque, bank e-statement, or passbook scan on the National Portal. The National Programme Implementation Agency (NPIA) will verify these details.

The release of the CFA will be facilitated through an e-token generated at the time of application. Once all required documents are uploaded and the DISCOM inspection is completed, the NPIA will review and approve the CFA release through the e-token. Consumers can redeem this token by logging into their profile on the portal, which will then trigger the transfer of CFA to the consumer.

For consumers who have opted for loan financing for their rooftop solar installations, the loan account details must also be included in their profile. When redeeming the e-token, the CFA will first be credited to the loan account. If the CFA amount exceeds the loan drawn, the excess will be disbursed to the consumer’s bank account. All CFA applications meeting the specified requirements will be processed within 15 days of submission, ensuring a prompt and efficient support system for consumers participating in the Yojana.

Performance

The PM-Surya Ghar Muft Bijli Yojana is poised to transform the residential energy landscape by enabling significant electricity bill savings and generating additional income for households through the sale of surplus power to DISCOMs. Each household installing a 3 kW rooftop solar system under this scheme can produce over 300 units of electricity monthly, effectively covering the free electricity provision of up to 300 units. With an ambitious target of adding 30 GW of solar capacity through residential installations, the scheme is expected to generate 1000 billion units (BUs) of electricity over the system’s 25-year lifespan, contributing to a substantial reduction in CO2 emissions, estimated at 720 million tonnes over this period.

On 17 July 2024, the Asian Development Bank (ADB) approved $240.5 million in loans to support expanding rooftop solar systems in India. This financing aims to support the Solar Rooftop Investment Program, initially approved by ADB in 2016 and restructured in 2023 to focus more on residential solar rooftop systems. ADB’s financing supports goals and contributes to the Prime Minister Surya Ghar program.

The financing will be made available to the State Bank of India (SBI) and the National Bank for Agriculture and Rural Development (NABARD). Specifically, ADB will provide SBI with $90.5 million from its Clean Technology Fund (CTF), while NABARD will receive $150 million—comprised of $80 million from ADB’s ordinary capital resources and $70 million from CTF.

The installation of rooftop solar systems can benefit the overall power distribution system by reducing the technical and operational burden. Rooftop solar facilities generate electricity close to where it is consumed, reducing the need for long-distance power supply and minimizing system losses. This localized power distribution system also provides a degree of energy independence, resulting in fewer power supply disruptions.

Impact

The PM Surya Ghar Yojana initiative not only promises significant savings on electricity bills for households but also offers opportunities to earn income through surplus power sales. Additionally, the scheme is set to foster significant economic growth by creating around 17 lakh (1.7 million) direct jobs across various sectors such as manufacturing, logistics, supply chain, sales, installation, and operations and maintenance. These combined outcomes underscore the scheme’s role in advancing renewable energy adoption, enhancing household financial stability, and contributing to broader environmental sustainability.

Initiatives of Other Countries

In 2022, China solidified its position as the global leader in solar PV capacity, installing over four times more capacity than the United States, the second-largest market. China’s installations in 2022 surpassed the combined capacity added by the other top nine markets. The country installed 94.7 GW in 2022, marking a 72% annual growth and a significant recovery from the 30 GW installed in 2019. China’s rooftop segment, driven by both residential and commercial & industrial (C&I) sectors, held a 54% market share in 2022. By the end of the year, China’s total solar installations exceeded 400 GW.

The United States maintained its position as the second-largest market, despite a 6% annual decrease in installations, totalling 21.9 GW in 2022. The decrease was attributed to the anticircumvention investigations, the Uyghur Forced Labor Protection Act (UFLPA), and the passing of the Inflation Reduction Act (IRA). The utility-scale segment accounted for 13.8 GW, or 63% of the total, while the rooftop segment grew by 25% to 8.1 GW, driven by strong residential demand.

Spain became the leading European market in 2022, moving up to the top five with an installed capacity of 8.4 GW, a 76% increase from 2021. The country’s robust Power Purchase Agreement (PPA) driven utility-scale segment and the significant growth of its self-consumption rooftop market contributed to this increase. Rising electricity prices due to the energy crisis further incentivized solar adoption.

Germany retained its position as the sixth-largest market, with a 23% growth in grid-connected solar capacity, reaching 7.4 GW in 2022. The country’s solar sector is predominantly based on rooftop installations supported by a feed-in premium scheme and regular tenders. The utility-scale segment also grew, reaching 3 GW in 2022.

Japan’s solar market saw a slight decrease in ranking, dropping to seventh place in 2022 with 6.5 GW installed. The end of the feed-in tariff (FIT) era at the end of 2022 marked a transition period for the market. New business models based on PPAs and third-party ownership began to gain momentum.

Australia, despite a decrease in installations, remained in the top ten, deploying 4 GW in 2022. The country faced challenging business conditions but is expected to see growth with a supportive government and improved PV component prices.

Overall, 2022 was a record year for solar energy, with global installations growing by 45% and surpassing the 200 GW milestone. China continued to lead, contributing 40% of global installations, while Europe and the Americas saw significant growth. The Middle East and Africa region also experienced remarkable growth, adding 8.3 GW. By the end of 2022, the global cumulative installed capacity of solar PV systems reached 1,177 GW, a 25% increase from 2021.

Emerging Issues

India, endowed with vast solar energy potential receives about 5,000 trillion kWh of energy per year, with most parts of the country receiving 4-7 kWh per square meter per day. The National Institute of Solar Energy (NISE) has assessed India’s solar potential at approximately 748 GW, assuming 3% of the wasteland area is covered by Solar modules.

The National Solar Mission (NSM) was launched on January 11, 2010, as part of India’s National Action Plan on Climate Change highlighting solar energy’s central role. As part of its climate pledge, India had set a target to install 175 GW of renewable energy capacity by 2022. This includes 100 GW of solar energy, 60 GW of wind energy, 10 GW of biomass power, and 5 GW of small hydropower.

In March 2021, the Standing Committee on Energy, chaired by Mr. Rajiv Ranjan Singh, submitted a report on the action plan for achieving the 175 GW renewable energy target by 2022. The committee noted that since the launch of the NSM, only 39 GW of solar energy capacity had been installed, with an additional 36 GW under implementation. The committee recommended that the central government formulate strategic plans to expedite the process to meet the target within the deadline.

The rooftop solar program, launched in February 2019, aimed at achieving 40 GW from rooftop solar projects by 2022. However, the committee noted that only 472 MW of capacity was achieved in 2019-20 against the target of 3,000 MW. The slow progress was attributed to a lack of awareness among the public. To address this, the committee recommended that the government should widely advertise the benefits of rooftop solar systems, set up single-window systems at the district level to facilitate installation, and offer higher subsidies for lower-income groups.

Despite the ambitious targets, as of February 28, 2023, India’s total renewable energy capacity stood at 168.96 GW. This includes 64.38 GW from solar power, 51.79 GW from hydropower, 42.02 GW from wind power, and 10.77 GW from biopower. Additionally, about 82 GW of renewable energy projects are at various stages of implementation, and approximately 41 GW are under the tendering stage.

To further boost renewable energy capacity, the government invited bids for 50 GW of renewable energy capacity in 2023, aimed at annual implementation for the next five years from FY 2023-24 to FY 2027-28. This annual bid for Inter-State Transmission (ISTS) connected renewable energy capacity will include setting up at least 10 GW of wind power capacity per annum also to meet the targets and by seeing the failures in the past this government came up with this PM-Surya Ghar Muft Bijli Yojana.

Also to reduce dependency on imported solar panels through tariffs and incentives for domestic production are essential for long-term sustainability and energy security. However, these measures have led to increased costs and slower capacity additions in the short term. Additionally, the challenge of managing solar panel waste and mitigating its environmental and health impacts requires urgent attention. Developing efficient recycling technologies and policies will be crucial to addressing these issues and ensuring the sustainable growth of India’s solar energy sector.

The PM Surya Ghar Yojana faces significant challenges that are particularly evident. One major issue is the reluctance of households to adopt rooftop solar due to the availability of free electricity provided by many states. This undermines the program’s potential success, which relies on widespread public participation. Additionally, DISCOMs encounter financial constraints with the net metering system, where compensating consumers for excess solar power strains their finances already burdened by fixed costs and power purchase agreements. Past schemes have also fallen short of targets, indicating systemic issues that hinder effective implementation. Recently Telangana faced technical glitches in the scheme’s online portal this will cause further exacerbate delays, frustrating potential beneficiaries and dampening enthusiasm.

These challenges not only impede the scheme’s ability to deliver economic benefits such as reduced electricity bills but also limit its contribution to environmental goals like reducing carbon emissions. Addressing these issues is essential to realizing PM Surya Ghar Yojana’s potential and achieving its objectives in fostering sustainable energy practices nationwide.

Way Forward

Recent measures to increase domestic manufacturing and reduce dependency on imported solar panels, the present prices of solar PV cells and modules are reported to be at their lowest levels in the past year and a half. Consequently, current prices are not seen as a barrier to the growth of solar power installations. The combination of financial incentives, supportive policies and low module prices has created a conducive environment for the continued expansion of rooftop solar capacity in India. But to harness the potential impact of rooftop solar electricity generation effectively, India must pursue a multifaceted strategy.

Firstly, addressing the barriers hindering household adoption, such as the provision of free electricity in some states, is crucial. This could involve policy adjustments to incentivize rooftop solar installations and educate communities about the long-term benefits of solar energy. Secondly, enhancing financial mechanisms and support for DISCOMs to manage the integration of rooftop solar into the grid infrastructure is essential. Clearing regulatory hurdles and ensuring fair compensation mechanisms through improved net metering policies can encourage DISCOMs to support and scale up rooftop solar initiatives.

Thirdly, investing in technology and innovation to further reduce the cost of solar installations will make the technology more accessible to a broader segment of the population adding to this there is a need for comprehensive policy and technology on solar panel e- wastes. This includes promoting research and development in storage solutions and smart grid technologies to optimize solar energy use and grid stability with waste management. Lastly, strengthening partnerships between government agencies, private sector stakeholders, and civil society organizations will foster collaboration and knowledge sharing, accelerating the deployment of rooftop solar across India.

By implementing these measures, India can expedite progress towards its renewable energy targets, alleviate pressure on traditional power grids, and make significant strides in combating climate change while ensuring a sustainable energy future for all.

References:

05 APR 2023 12:59 PM by PIB, Government declares plan to add 50 GW of renewable energy capacity annually for next 5 years to achieve the target of 500 GW by 2030
29 FEB 2024 3:40 PM by PIB Delhi, Cabinet approves PM-Surya Ghar: Muft Bijli Yojana for installing rooftop solar in One Crore households
01 MAR 2024 5:36 PM by PIB Thiruvananthpuram, PM Surya Ghar Muft Bijlee Yojana
Ministry of New and Renewable Energy, “Guidelines for PM-Surya Ghar: Muft Bijli Yojana”, Guidelines for “PM-Surya Ghar: Muft Bijli Yojana” | Ministry of New and Renewable Energy | India
PM India, Cabinet approves PM-Surya Ghar: Muft Bijli Yojana for installing rooftop solar in One Crore households | Prime Minister of India
The Hindu, Published – June 30, 2024 01:15 am IST – Hyderabad, Writer: V. SWATHI
Asian Development Bank ADB Approves Support for Rooftop Solar Systems in India | Asian Development Bank
Solar Power Europe Global Market Outlook For Solar Power 2023 – 2027 – SolarPower Europe
18 OCT 2023 6:57 PM by PIB Delhi 6th Assembly of International Solar Alliance to be held in New Delhi from October 30 – November 2, 2023
31 OCT 2023 6:11 PM by PIB Delhi India hosts the 6th Session of the International Solar Alliance Assembly in New Delhi
PRS “Standing Committee Report Summary”, Committee Report: Action plan for achievement of 175 GW renewable energy target
PRS “Science & Technology Policy Brief: Renewable Energy” Science & Technology Policy Brief: Renewable Energy

About the Contributor: Shivashish Narayan is an Intern at IMPRI. He is a law graduate from Indore Institute of Law. His interest areas are policy and legal.

Acknowledgment: The author would like to express sincere gratitude to Dr. Arjun Kumar, Ms Aasthaba Jadeja, Ms Naushaba and Ms Reetwika Mallick for their invaluable contributions into this article.