Rooftop solar hits record surge; GST cut to 5% on solar, 18% on batteries to power growth

In a significant boost to India's renewable energy sector, rooftop solar installations surged by 121% year-on-year in the second quarter of 2025. This remarkable growth was largely driven by an increase in residential projects under the PM Surya Ghar program. Official reports indicate that nearly three-quarters of all new installations were residential, highlighting the program's effectiveness in promoting solar energy adoption across the country.

According to Mercom India, the country added 1.6 gigawatts (GW) of rooftop solar capacity in Q2 2025, marking a 33% increase quarter-on-quarter. This growth underscores the impact of policy initiatives and a burgeoning demand for clean energy solutions. "The growth in installations during H1 and Q2 2025 was largely driven by the clearance of delayed registrations, commissioning of new systems, and enhancements to the PM Surya Ghar portal," Mercom India stated.

The residential sector accounted for over 74% of the new capacity additions, followed by the industrial and commercial sectors, contributing 19% and 6%, respectively. The government sector saw a modest increase with nearly 0.5% of the installations. The prominence of residential installations demonstrates a shift in consumer preference towards sustainable energy solutions.

Gujarat, Maharashtra, Uttar Pradesh, Kerala, and Rajasthan led the addition of rooftop solar capacity. These states represented 64% of the total installations during the quarter, indicating strong regional growth in solar energy infrastructure. Assam registered the highest compounded quarterly growth rate of nearly 24% from Q2 2024 to Q2 2025, showcasing robust expansion in new markets.

The recent reduction in Goods and Services Tax (GST) on solar and wind equipment, from 12% to 5%, is expected to further stimulate the sector. The GST Council's decision to lower taxes on various components, including silicon wafers and photovoltaic cells, aims to reduce capital costs, thereby making solar energy more accessible and affordable. This move is anticipated to benefit power distribution companies through lower power purchase costs.

However, industry experts caution that challenges remain. Raj Prabhu, CEO of Mercom Capital Group, noted, "The rooftop solar market is on track for record growth this year, with residential adoption under the PM Surya Ghar program driving nearly three-quarters of new installations. However, persistent DCR module shortages, regulatory unpredictability in some states, net metering and payment issues, threaten to slow this momentum unless addressed quickly. Policy clarity and reliable supply will be critical to sustaining growth at these levels."

The capital expenditure (CAPEX) model dominated new installations, accounting for 88% of quarterly additions. This highlights a preference for upfront investments in the sector. Furthermore, solar tenders saw significant growth, with 1,269 megawatts (MW) issued in Q2 2025, marking an increase of over 232% quarter-on-quarter.

Overall, the rooftop solar market appears poised for further expansion, with policy support and consumer interest as key drivers. The reduction in GST is expected to enhance affordability, bolstering India's efforts towards a sustainable energy future. Nevertheless, addressing systemic challenges will be crucial to maintaining this growth trajectory and achieving long-term energy goals. Additionally, the rationalization of GST in the solar, wind, and battery sectors is anticipated to lower the capital cost for solar and wind power projects by 5%, making clean energy solutions more accessible for households and businesses.