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Solar-Plus-Storage Under PM Surya Ghar 2.0 May Hinge on Subsidy Levels

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					</table>Integrating battery energy storage with rooftop solar systems could improve residential power consumption and reduce reliance on the grid during non-solar hours, but it is expected to increase upfront costs and extend the payback period.
With about six months to go before the PM Surya Ghar: Muft Bijli Yojana ends, the industry expects the government to extend the program, considering that the target of installing rooftop solar panels on 10 million households by March 2027 may be difficult to achieve.
As of August 2026, India&#8217;s rooftop installations under PM Surya Ghar have <a href="https://www.mercomindia.com/pm-surya-ghar-powers-5-million-homes-total-capacity-hits-15-gw" target="_blank" rel="noopener">crossed</a> 5 million households since its launch in February 2024. Cumulative rooftop solar capacity additions have reached 14.8 GW.
Rooftop installers expect PM Surya Ghar 2.0 to provide for integration of battery energy storage systems (BESS) with rooftop solar systems.
Radhika Choudary, Co-founder and Director at <a href="https://freyrenergy.com/" target="_blank" rel="noopener">Freyr Energy</a>, said battery integration would shift the focus from simply adding rooftop solar capacity toward increasing self-consumption while also providing greater flexibility to distribution companies (DISCOMs).
Agreeing with Choudary, Terrance Alex, Founder and CEO of <a href="https://wattsun.in/" target="_blank" rel="noopener">Wattsun Energy</a> said households equipped with at least 5 kWh of battery storage could meet a significant portion of their peak evening demand using stored energy.
Costs, Sizing, and Viability
However, installers said the biggest challenge would be the cost of batteries that consumers would have to incur and the impact on upfront investment and payback period. Proponents of rooftop solar have been harping on the benefit of a short payback period of below five years.
Alex estimated that grid-connected rooftop solar systems currently cost around ₹50,000 (~$527)/kW to ₹ 60,000 (~$632)/kW, while systems incorporating lithium-ion batteries could cost ₹90,000 (~$948)/kW to ₹100,000 (~$1,053)/kW. Adding batteries could nearly double the cost and prolong the payback period to around ten years from five.
Choudary said the higher upfront expenditure would come not only from battery packs but also from battery management systems, hybrid inverters, protection equipment, and installation costs.
It is not yet clear whether PM Surya Ghar, if extended, will specify storage for what capacity of rooftop solar systems. But installers said battery integration could make economic sense for systems of at least 3 kW to 5 kW.
Alex said the speculation is that the government may mandate a storage requirement equivalent to around 30% of project capacity for rooftop systems above 3 kW. However, he cautioned that requiring storage equivalent to 50% of project capacity for larger apartment projects could undermine their viability.
Ajay Yadav, President of <a href="https://www.rear.org.in/" target="_blank" rel="noopener">Renewable Energy Association of Rajasthan</a>, however, felt that storage capacity should be around 50% for residential systems, particularly those of 5 kW and above.
According to Tinsu Mathew, Managing Director at <a href="https://elsol.co.in/" target="_blank" rel="noopener">EL Sol Power Solutions</a>, the industry expects a storage mandate for rooftop solar systems of up to 10 kW. However, he cautioned that the additional cost could reduce rooftop solar adoption by at least 20%. He hoped the government will avoid making storage mandatory.
According to Mercom estimates, India has an average conversion rate below 50% for PM Surya Ghar applications. Linking storage to the rooftop solar program could reduce it further but would come with additional benefits for consumers.
<div id="attachment_104712" style="width: 1549px" class="wp-caption aligncenter"><a href="https://mercomindia.s3.ap-south-1.amazonaws.com/wp-content/uploads/2026/09/conversion1.png"><img loading="lazy" decoding="async" aria-describedby="caption-attachment-104712" class="wp-image-104712 size-full" src="https://mercomindia.s3.ap-south-1.amazonaws.com/wp-content/uploads/2026/09/conversion1.png" alt="Solar-Plus-Storage Under PM Surya Ghar 2.0 May Hinge on Subsidy Levels" width="1539" height="820" srcset="https://mercomindia.s3.ap-south-1.amazonaws.com/wp-content/uploads/2026/09/conversion1.png 1539w, https://mercomindia.s3.ap-south-1.amazonaws.com/wp-content/uploads/2026/09/conversion1-300x160.png 300w, https://mercomindia.s3.ap-south-1.amazonaws.com/wp-content/uploads/2026/09/conversion1-768x409.png 768w, https://mercomindia.s3.ap-south-1.amazonaws.com/wp-content/uploads/2026/09/conversion1-1536x818.png 1536w, https://mercomindia.s3.ap-south-1.amazonaws.com/wp-content/uploads/2026/09/conversion1-650x346.png 650w, https://mercomindia.s3.ap-south-1.amazonaws.com/wp-content/uploads/2026/09/conversion1-624x332.png 624w, https://mercomindia.s3.ap-south-1.amazonaws.com/wp-content/uploads/2026/09/conversion1-600x320.png 600w" sizes="auto, (max-width: 1539px) 100vw, 1539px" /></a>Solar-Plus-Storage Under PM Surya Ghar 2.0 May Hinge on Subsidy Levels</div>
Choudary instead favored a load-based approach. She said storage would be most relevant for households with higher evening consumption and larger rooftop systems, and that any threshold should account for consumer load profiles, battery economics, and DISCOM requirements.
Incentives for Storage 
Given the higher capital expenditure associated with batteries, installers said the viability of PM Surya Ghar 2.0 would depend heavily on the level and structure of government financial assistance.
Under the existing program, central financial assistance is ₹30,000 (~$316)/kW for up to 2 kW and ₹18,000 (~$190)/kW for the additional capacity up to 3 kW, with the subsidy capped at ₹78,000 (~$822) for systems of 3 kW and above. Various states have also announced top-up subsidies.
Existing guidelines permit battery storage, but financial assistance is calculated based on solar module capacity rather than battery capacity. However, this could change if the subsidy pivots to the storage component.
Stakeholders differed on how subsidies under the proposed program should be structured.
Alex suggested financial assistance of around ₹100,000 (~$1,053.05) for a 3 kW solar-plus-storage system if batteries are mandated and the existing solar subsidy continues.
Yadav said one possible approach would be to reduce or remove subsidies for the solar component and direct financial assistance primarily toward battery storage. Consumers would be more likely to adopt storage if government support directly offsets battery costs.
He estimated that adding storage could extend the payback period for residential rooftop systems by around 1.5 years.
International experience also shows that incentives can play an important role in creating an early market for residential storage. In the U.S., federal incentives historically provided a 30% tax credit for eligible residential battery storage systems.
“There will always be a chicken-and-egg problem with a new market. Battery costs need to come down for residential storage to scale, but the market also needs scale for costs to come down. We have seen in the U.S. how incentives for solar and battery storage helped improve project economics and accelerate adoption. India has to start somewhere. Bringing battery storage under PM Surya Ghar and providing meaningful incentives can help create that initial demand and build the scale needed for the market to develop. As volumes increase, competition grows, manufacturing expands, and the supply chain matures, costs should start coming down, making storage increasingly viable without the same level of government support,” said Raj Prabhu, CEO of Mercom Capital Group.
Mathew favored separate subsidies for rooftop solar and battery storage, arguing that support for both components would be necessary to keep solar-plus-storage systems economically viable for households.
Installers say that with current battery technology offering around 6,000 cycles, these hybrid projects could be viable, as the battery would need replacement only after 15 years.
Impact of State Storage Mandates
Even before a potential nationwide storage mandate from the Ministry of New and Renewable Energy (<a href="https://mnre.gov.in/en/" target="_blank" rel="noopener">MNRE</a>), some state DISCOMs and regulators have pushed for storage integration with rooftop solar. Installers operating in these markets say rooftop solar can remain viable despite the additional cost of batteries.
The Maharashtra Electricity Regulatory Commission has mandated storage equivalent to 50% of the installed capacity for projects above 100 kW. But households may not be installing systems of that high capacity.
Maharashtra-based Installers said that the higher upfront investment may reduce consumer savings, but rooftop solar can <a href="https://www.mercomindia.com/maharashtras-storage-mandate-reshapes-rooftop-solar-economics" target="_blank" rel="noopener">remain</a> economically attractive given the state’s relatively high grid tariffs. The storage requirement has also been accompanied by changes to power banking rules, with banking restricted to solar generation hours.
The Kerala State Electricity Regulatory Commission has issued a draft proposal for a 30% storage requirement for rooftop solar systems between 3 kW and 5 kW. The Kerala High Court has since stayed the provision. Installers said even the draft proposal temporarily affected demand.
However, over the past year, Kerala’s residential rooftop market has seen <a href="https://www.mercomindia.com/kerala-begins-shifting-toward-solar-plus-storage-as-rooftop-market-matures" target="_blank" rel="noopener">growing</a> interest in solar-plus-storage systems even without a mandate, as more consumers recognize the potential benefits and economic viability of battery-backed solar.
“The objective should not be to subsidize batteries indefinitely. Incentives can be used to get the market to a scale where transaction volumes increase, the supply chain develops, competition increases as installers gain experience, and costs start declining. Solar followed a similar path. Storage will need an initial push as well,” Prabhu added.
Regulatory Support
Industry stakeholders said subsidies alone would not be sufficient to enable large-scale deployment of residential solar-plus-storage systems.
Yadav said a clear framework governing battery charging and discharging should accompany PM Surya Ghar 2.0 to improve project economics.
Stakeholders also called for regulatory clarity on hybrid system design before solar-plus-storage systems are deployed at scale.
Yadav also raised concerns about the safety of residential battery installations, noting that many installers currently participating in the PM Surya Ghar program have limited experience with battery energy storage systems.

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