Decentralized solar projects like rooftop and KUSUM now make up 40% of India's capacity additions in FY27, up from 22% last year. This trend highlights a major shift as grid constraints and power evacuation delays create revenue risks for large-scale utility projects.
India’s renewable energy expansion is undergoing a notable shift. In the first four months of the current financial year 2027, decentralized solar initiatives—specifically rooftop installations and the Pradhan Mantri Kisan Urja Suraksha evam Utthan Mahabhiyan (KUSUM) scheme—accounted for 40% of all new solar capacity additions. This is a sharp increase from the 22% contribution seen in the previous fiscal year, highlighting a move away from purely large-scale projects.
The primary driver of this change is not just consumer demand, but a significant bottleneck in India's power grid. Large utility-scale solar projects are currently facing major hurdles in getting connected to the electricity network. There is a structural mismatch in construction timelines: while a solar plant can be set up in 12 to 18 months, building the necessary transmission lines to carry that power typically takes 36 to 60 months.
This delay has created a difficult environment for large developers. Many utility-scale projects are currently forced to rely on temporary grid access permissions to supply power. This setup often results in severe power evacuation issues, where projects are unable to send all their generated electricity to the grid. In some regions, this has led to forced power cuts for generators that can reach 30% to 50% during peak sunlight hours. For investors, this creates direct financial risk, as the actual revenue earned is often much lower than the capacity of the plant would suggest.
In response, the government and industry are pivoting toward decentralized energy. Schemes such as 'PM Surya Ghar: Muft Bijli Yojana' aim to install rooftop systems on 10 million households, bypassing the need for heavy, long-distance transmission infrastructure. By generating power at the point of consumption, these projects avoid the grid bottlenecks that currently limit utility-scale developers.
For those tracking the sector, the key monitorable is no longer just the total capacity added, but the quality of grid connectivity. Investors may look for companies that have secured permanent, long-term grid access, as opposed to those relying on temporary networks. Additionally, the speed at which the government can upgrade transmission infrastructure will determine when large utility-scale projects can return to operating at full capacity without the threat of forced power cuts.