To meet its target of 500 GW of Renewable Energy by 2030, India needs to significantly ramp up installations to 65-70 GW each year. Over 80 per cent of this target is expected to come from solar power. Despite significant progress, the penetration of solar energy, particularly rooftop solar (RTS), remains limited due to financial, technical, and awareness barriers.
To bridge this gap and encourage residential households to generate their own electricity, the Government of India has launched initiatives like PM Surya Ghar: Muft Bijli Yojana, which took off in February 2024. The scheme has an outlay of Rs 75,021 crore to subsidise RTS installations in 1 crore households by FY 2026-27. Additionally, various states offer their own subsidies, enhancing financial viability for residential and commercial users.
Yet, adoption remains low, particularly in urban areas, where RTS has the potential to significantly reduce energy costs and emissions. This article explores viable business models for mainstreaming RTS in Indian cities, examining both residential and commercial contexts. By “business models,” we mean structured financing and ownership mechanisms, such as self-ownership, lend-and-lease, and third-party ownership, that can help individuals and businesses overcome the upfront costs and complexities of RTS adoption.
We envision pathways that could drive widespread RTS adoption in India’s cities, examining how these models could shape a more energy-efficient, renewable-powered future.
RTS Business Models – Overview
A key factor in leveraging RTS initiatives is choosing between on-grid and off-grid solutions. On-grid RTS systems, suited for urban and semi-urban settings, connect to the main electricity grid, allowing consumers to draw power from their local distribution company (DISCOM) when solar generation falls short. These systems operate under two models: gross metering and net metering. In gross metering, all solar energy is exported to the grid at a fixed feed-in tariff (FiT), while consumers pay the retail supply tariff (RsT) for electricity used. Net metering, however, offsets energy bills by deducting exported solar energy from total consumption, making it more cost-effective when consumption exceeds generation. For instance, a Jaipur consumer using 150 units monthly and generating 100 units via RTS would pay INR 900 under gross metering (100 units × INR 6/kWh FiT) but INR 450 under net metering (50 units × INR 9/kWh RsT). In Goa, where net metering buyback rates average INR 3/unit, this model is ideal for consumers with consistent surpluses, while gross metering suits high solar generation with favorable FiT rates.
Given the wide range of individuals and organisations interested in RTS—from residential households with limited space to businesses —different models have emerged to suit their unique needs. For example, some users prioritise reducing monthly electricity bills, while others might focus on earning additional income by selling excess energy back to the grid. Other factors – like how much roof space is available, whether the user owns or rents the property, how much they can afford to invest upfront, and how much risk they are willing to take – also influence the choice of an RTS business model. These models help users to either generate income by selling the energy produced, or to save money by using the electricity directly on-site to cut down on power bills.
- CAPEX Model
In the Capital Expenditure (CAPEX) model, the consumer purchases and owns the rooftop solar (RTS) system outright. After hiring a vendor to install the system, full ownership and responsibility for maintenance are transferred to the consumer. This model is best suited for homeowners or businesses with the financial capacity for upfront investment and a long-term perspective. While the initial cost can be high, it offers autonomy in system operation and significant long-term savings on electricity bills by reducing reliance on grid power. For example, a small business owner investing in a 10 kW system can achieve a payback period of 6–8 years, with cost savings accumulating over the system’s 25-year lifespan.- Group Net Metering
Group net metering allows a single consumer to export excess energy generated from their RTS to the grid and distribute it across multiple electricity connections registered in their name as a prosumer (producer-consumer). For instance, a hospital generating surplus power at one location can offset energy costs at its satellite clinics, maximising renewable energy utilisation and overcoming space constraints. This framework provides significant cost savings for prosumers but requires clear regulatory and operational guidelines to ensure smooth implementation. - Virtual Net Metering
Virtual net metering enables multiple consumers within the same electricity license area, such as residents of apartment buildings, to collectively purchase an RTS system. The electricity generated is injected into the grid, and credits are distributed among participants proportional to their contribution towards system installation. This model addresses space and ownership barriers, making it particularly suitable for urban residential communities. For instance, in a 50-flat Mumbai apartment, each owner contributing INR 50,000 towards a 25 kW RTS system could see monthly electricity savings of INR 600–700, depending on their energy consumption and local net metering buyback rates. These models overcome space and ownership barriers, offering significant cost savings, but they require clear guidelines for effective implementation..
- Group Net Metering
- RESCO Model
The Renewable Energy Service Company (RESCO) model involves a third-party service provider in owning, installing, operating, and maintaining the RTS system. Consumers enter into long-term agreements with the service provider, committing to purchase [a monthly quantum of] electricity at a predetermined rate, typically lower than grid tariffs. For example, a mall might sign a 20-year agreement with a RESCO provider to reduce energy costs without needing to invest upfront. This model is ideal for businesses or organisations that prefer to avoid the technical responsibilities and upfront financial costs of ownership. However, it may not offer the same long-term savings as the CAPEX model since consumers pay for the electricity consumed rather than owning the system outright.
- Solar leasing model: In the solar leasing model, the rooftop owner leases their space to a solar company, which installs and operates the system. The rooftop owner receives a pre-agreed rent, while the solar company sells the electricity generated either to the grid or a specific consumer. For example,Tata Power’s Solar Rooftop Leasing program in Tamil Nadu has helped factories monetise their unused rooftop spaces by leasing them to the company, which sells the electricity to the grid. Conversely, under a variation of this model, the rooftop owner leases the solar system itself from the company, reducing their grid dependency and saving on power bills. This model is particularly advantageous for property owners seeking predictable rental income and energy users looking for reliable electricity savings.
- Solar Co-operatives Model
The solar co-operatives model involves multiple roof or landowners pooling resources to install an RTS system collectively. Revenue from the electricity generated is distributed among members based on their investment. This cooperative approach enhances financial viability and encourages collective action, particularly in rural or semi-urban areas with dispersed ownership. For instance, farmers in Tamil Nadu forming a cooperative to install a 100 kW RTS system could generate stable income from energy sales while sharing maintenance responsibilities. Unlike virtual net metering, which typically involves sharing energy credits among participants for a single system, solar co-operatives require a more direct investment in the installation, making it a CAPEX-driven model. This distinction allows for more control over both energy generation and revenue distribution compared to the credit-based model of virtual net metering.
While these innovative business models offer collective benefits and risk mitigation, the widespread adoption of RTS systems still faces several challenges.
The rooftop solar business models explored here showcase the immense potential for transforming India’s energy landscape. From empowering individual households with CAPEX and RESCO models to fostering collective action through solar cooperatives and virtual net metering, these approaches offer scalable, sustainable solutions to energy challenges. However, the path to widespread adoption is fraught with barriers, including regulatory complexities, financing gaps, and consumer awareness issues.
In the next part of this series, we will dive deeper into these challenges, examining how they hinder the adoption of rooftop solar systems in India. We’ll also uncover innovative solutions, global lessons, and policy recommendations that could bridge the gaps, enabling these models to achieve their full impact. Stay tuned to explore the critical steps needed to unlock India’s solar future.
