Third Party Financing for Rooftop Solar Power in India

This report analyzes the potential of the third party financing model to help India reach its target of 40 GW of rooftop solar power by 2022. It identifies high upfront costs, limited debt finance, and perceived performance risks as primary barriers, and proposes specific policy changes and financial instruments to scale the industry, particularly for commercial and industrial consumers.

• The Government of India has set a target of 40 GW of rooftop solar power by 2022, a substantial increase from the 0.7 GW installed as of March 2016. The growth rate is currently slower than required to meet this goal.
• Three primary barriers hinder rooftop solar growth: high upfront installation costs (e.g., over INR 10 million for typical 150-200 KW commercial/industrial installations), limited access to debt finance due to bank risk aversion, and consumer concerns regarding the long-term performance of the technology.
• The third party financing model, where a developer installs and owns the plant and sells power to the consumer via long-term agreements (15-25 years), currently accounts for 102 MW (13%) of installations. Industry estimates suggest this model could potentially support over 20 GW by 2022.
• The third party financing model is financially viable for commercial and industrial segments in most states, often even without government incentives because many states have reached grid parity. The residential segment is less viable due to high transaction costs and low profitability, with grid parity not expected until around 2020.
• Scaling the third party model requires addressing limited debt finance, consumer credit risk, and inconsistent net metering implementation by state-level public electricity distribution companies (DISCOMs). Proposed solutions include banker training by the Ministry of New and Renewable Energy (MNRE), including DISCOMs in power purchase agreements, and creating specialized courts for payment disputes.
• Three specific financial instruments are recommended: Loans4SME (a peer-to-peer lending platform), the Rooftop Solar Private Sector Financing Facility (using warehouse lines of credit and green bonds), and a Rooftop Solar Investment Trust (RSIT) to bundle installations into 1 to 5 MW packages for investors.

APA

Climate Policy Initiative (2016). Third Party Financing for Rooftop Solar Power in India. https://www.climatepolicyinitiative.org/publication/third-party-financing-rooftop-solar-power-india/

Chicago

Climate Policy Initiative. Third Party Financing for Rooftop Solar Power in India. 2016. https://www.climatepolicyinitiative.org/publication/third-party-financing-rooftop-solar-power-india/.

Wikipedia

{{cite report |author=Climate Policy Initiative |title=Third Party Financing for Rooftop Solar Power in India |date=7 September 2016 |url=https://www.climatepolicyinitiative.org/publication/third-party-financing-rooftop-solar-power-india/ |access-date=17 August 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{climatepolicyinitiative2016third, author = {{Climate Policy Initiative}}, title = {{Third Party Financing for Rooftop Solar Power in India}}, institution = {Climate Policy Initiative}, year = {2016}, month = sep, url = {https://www.climatepolicyinitiative.org/publication/third-party-financing-rooftop-solar-power-india/}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }