India’s solar open access market witnessed a slowdown in the fourth quarter (Q4) of 2025, with regulatory changes, tariff structuring, and grid constraints affecting project development and the pace of commissioning in major markets.

According to Mercom’s recently released Q4 and Annual 2025 India Solar Open Access Market Report, many leading solar open access markets saw a significant decline in installations.

Major states such as Karnataka, Rajasthan, and Uttar Pradesh saw a slowdown in solar open-access installations despite continued interest among commercial and industrial (C&I) consumers in renewables to reduce electricity costs and meet sustainability targets.

Although these states have relatively mature markets, installations slowed due to regulatory changes, grid constraints, and project execution challenges.

Sharp Quarterly Drop in Karnataka

Karnataka ranked fourth in solar open access installations in Q4 2025, contributing roughly 16% of the country’s quarterly additions. While installations rose marginally (0.3%) year-over-year, they fell sharply by more than 70% quarter-over-quarter following heavy commissioning earlier in the year.

Distribution companies in the state have shown reluctance to sign power sale agreements with renewable implementing agencies because seasonal demand patterns do not align with the year-round generation profile of renewable projects. As a result, developers holding letters of award without finalized power purchase agreements are increasingly shifting to the C&I open access segment.

At the same time, approvals under the Green Energy Open Access framework and the introduction of Deviation Settlement Mechanism regulations have added compliance requirements and slowed project development. The recent reduction in retail electricity tariffs for high-voltage consumers has also narrowed the cost advantage of open access procurement, putting pressure on project economics.

Despite these regulatory and market challenges slowing project execution during the quarter, Karnataka remained the leading state for solar open access additions in 2025, with annual installations rising by over 70% YoY and accounting for roughly one-quarter of the country’s cumulative installed capacity.

Growing IT and data center infrastructure in Karnataka is expected to create new opportunities for open access developers. In addition, the proposed renewable energy manufacturing corridor in Vijayapura under the Karnataka Industrial Policy FY 2025-30, including solar cell manufacturing, could enhance capacity under the Approved List of Models and the Approved List of Manufacturers List-II, reduce logistics costs, and create additional demand for green power through open access.

Grid Challenges in Rajasthan

Rajasthan recorded its sharpest quarterly slowdown to date in Q4 2025, ranking eighth nationally and contributing around 2.5% of installations. Installations declined by more than 70% YoY and dropped by over 90% QoQ, highlighting the impact of grid and regulatory challenges on project commissioning.

Transmission congestion and limited grid evacuation capacity remained key bottlenecks for renewable project development in Rajasthan. Curtailment risks, delays in transmission infrastructure expansion, and difficulties in securing grid connectivity and substation access slowed project commissioning, particularly in regions with high renewable energy penetration. The transition to Rajasthan’s Green Energy Open Access regulations also added administrative complexity during the quarter, requiring developers to align projects with new compliance and approval procedures.

Although abundant land availability enabled developers to advance project development quickly, transmission constraints were not fully anticipated during planning, creating a mismatch between generation readiness and evacuation infrastructure.

The state revised its tariff structure by increasing fixed charges and reducing energy charges for high-tension consumers, making grid supply more attractive for industries with continuous load profiles while improving the viability of open access for seasonal consumers. The new regulations also expanded eligibility for C&I consumers and introduced provisions supporting energy storage integration, while transmission infrastructure upgrades are expected to improve evacuation capacity and reduce curtailment risks in the coming years.

Land, Grid Challenges in Uttar Pradesh

Solar open access installations in Uttar Pradesh declined in Q4 2025, falling by nearly 33% QoQ and 87% YoY as project commissioning slowed significantly.

The decline resulted from a combination of market weaknesses, regulatory uncertainty, and execution bottlenecks, with several projects expected to be commissioned during the quarter failing to progress to the execution stage.

Despite a supportive policy environment, open access adoption in Uttar Pradesh has remained below potential due to execution challenges. Grid and transmission constraints persist, particularly at the 33 kV and 132 kV levels, and limited availability of higher-voltage substations for evacuating large volumes of renewable energy, and land have emerged as key barriers.

The Uttar Pradesh Captive and Renewable Energy Generating Plants Regulations, 2024, notified in October 2025, set the framework for captive and open access renewable generation through FY29. The regulations provide transmission and wheeling charge exemptions, allow banking of up to 100% within defined settlement periods, and introduce differentiated tariff treatment for captive generation compared to grid procurement, improving cost visibility and policy clarity for solar developers and large industrial consumers such as manufacturing units and data centers, considering open access renewable procurement.

Uttar Pradesh has a large project pipeline for the coming quarters despite land, evacuation, and other regulatory challenges, which is expected to support higher installation activity.

India added 7.8 GW of solar open access capacity in 2025, a largely flat 0.5% YoY increase from 7.7 GW.

Interstate transmission system-linked projects typically require 2-3 years to develop transmission lines due to the scale and complexity of ultra-high and high-voltage infrastructure. Land acquisition alone can take over a year, while environmental clearances generally require an additional 2-3 months, often delaying the availability of transmission infrastructure required to evacuate renewable power.

Although solar open access installations slowed across several key states in Q4 2025, demand from C&I consumers remains strong, as industries continue to procure renewable energy to reduce electricity costs and meet sustainability goals. Developers are increasingly exploring hybrid and storage-integrated renewable projects to address grid constraints and improve supply reliability.

The slowdown appears short-term, driven by regulatory adjustments and infrastructure limitations. The market is expected to regain momentum as open-access regulations stabilize and transmission networks expand, alongside rising corporate demand for clean energy.