Phase II of Residential Rooftop Solar Program Extended Until March 31, 2026

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The Ministry of New and Renewable Energy (MNRE) has extended Phase II of the ‘Grid-Connected Rooftop Solar Program’ until March 31, 2026.

The program has been extended without any addition to the originally approved outlay of ₹118.14 billion (~$1.66 billion) for both the residential segment (Component A) and distribution companies (Component B).

However, any savings in the Central Financial Assistance (CFA) for the residential segment or incentives to the distribution companies (DISCOMs) after achieving the prescribed target must be utilized to support additional capacity in the residential segment.

The program was launched in 2019 to help reach the 40 GW of rooftop solar capacity target by 2022. Under Phase II, 38 GW of grid-connected rooftop solar capacity was expected to be installed. According to Mercom India’s Rooftop Solar Market Report Q2 2022, India has only installed approximately 8 GW of rooftop solar. The lack of traction in rooftop installations can be attributed to the uncertainty over the net metering cap, among other reasons.


The net metering mechanism has seen a series of revisions. Net metering for rooftop solar systems was capped at 1 MW until the government proposed to cut it to 10 kW in December 2020. After opposition by the industry, the government approved net metering for a capacity of up to 500 kW.

Even though the net metering policy exists in most states, implementation has been patchy. Most DISCOMs are averse to net metering as it deprives DISCOMs of the opportunity to earn more revenue from premium consumers.

Rooftop solar can help DISCOMs reduce transmission and distribution losses as power consumption, and generation are co-located. These systems are also useful for tackling daytime peak loads as the solar generation profile matches the peak loads during the day.

Recently, MNRE issued new and simplified CFA calculations for rooftop solar systems installed by residential consumers. The ministry also launched a portal to enable transparent processing of the subsidy. The subsidy calculation will now be on the capacity of the rooftop solar system instead of the earlier method based on the benchmark cost set every year for these consumers.

In February last year, MNRE issued amendments to the guidelines for the Phase II of the ‘Rooftop Solar Program.’ The implementing agency should assign 10% of the total allocated quantity to the lowest bidder. Only the grid-connected rooftop solar systems installed in the area of the DISCOM would be considered for the calculation of incentives.