Kerala witnessed an unprecedented drop in monthly rooftop solar capacity additions, as low as 12 MW in July this year, compared to an average monthly installation of 35 MW, due to an unfavorable regulatory proposal by the Kerala State Electricity Regulatory Commission (KSERC) that impacted the segment.

According to KSERC’s draft order, net metering for rooftop solar systems is limited to projects with a capacity of up to 3 kW. For projects between 3 kW and 5 kW,  there is a mandate to include an energy storage system of up to 30% of the project size.

The existing rules provide for net metering up to 1 MW.

The draft order also proposes prosumers paying grid-support charges, changes in energy banking policies, and considering 75% of the Solar Energy Corporation of India’s (SECI) discovered rates for the feed-in tariff.

Due to the proposed changes, rooftop installers have reported a drop in monthly capacity additions.

Kerala is one of the leading states for rooftop solar adoption under the PM Surya Ghar: Muft Bijli Yojana, with over 130,000 installations completed as of August 2025.

Mercom had reported about how the draft KSERC order is likely to impact the booming rooftop solar segment in the state.

Rooftop installers fear that the numbers will continue to fall without an interim order stabilizing the rooftop solar policies in the state.

Tinsu Mathew, Managing Director at El Sol Power Solutions, said that the average monthly installation capacity fell to 12 MW in July, and further to just 5 MW by mid-August.

“Compared to the typical dip in the second and third quarters, which is usually caused by monsoon rains, this one-third reduction is severe. Many engineering, procurement, and construction (EPC) companies with small portfolios, with less than five to 10 installations per month, are now seeking refund of the ₹250,000 (~$2,868) paid as security deposit for empanelment as PM Surya Ghar vendors.”

Mathew said that while big companies can survive a 10% to 20% shortfall, the 66% drop in sales could mean a complete shutdown for some of them. “Some companies may be forced to drastically reduce their workforce, resulting in team strength cuts and monthly losses.”

As a consequence of the loss of confidence in solar, Terance Alex, Founder and CEO at WattSun Energy, said that most people are requesting that they hold the projects until the outcome of the draft order is clear.

According to rooftop installers, the public perception that the regulation will retroactively impact prosumers has created unease among them.

Alex noted that Kerala has around 500 vendors who are actively working on bigger installations for the commercial and industrial (C&I) segment.

Installers believe that without the benefit of net metering, demand from the C&I segment is likely to decline in Kerala.

Reduced ROI

Installers say that the new regulations propose a shift from yearly banking policy to monthly banking. Existing consumers will not be able to carry forward excess power to the next month. “In case of excess power, it can be sold at an incompetent price, affecting the return on investment (ROI) of the prosumer,” Mathew said.

He noted that the new draft also proposes a feed-in tariff based on the tariffs determined by the Solar Energy Corporation of India, rather than the average power purchase cost, which had previously served as the reference for excess unit sales.

Mohamed Shaffeeq, General Secretary at Kerala Renewable Energy Entrepreneurs & Promoters Association, said that according to current regulations, prosumers will end up getting a feed-in-tariff not higher than the retail tariff.

“Once the new regulation kicks in, prosumers will get around ₹2 (~$0.02)/kWh to 2.5 (~$0.028)/kWh for power exported, while they pay ₹6 (~$0.068)/kWh to ₹8 (~$0.091)/kWh for imported power. Additionally, there will be a levy of ₹1 (~$0.011)/kWh for generation. The final benefit for the prosumer will range from ₹1 (~$0.011)/kWh to ₹4 (~$0.045)/kWh,” added Shaffeeq.

However, other installers say that the feed-in tariff could be even as low as ₹2 (~$0.02)/kWh.

Another aspect that has hindered solar prosumers in Kerala is that power wheeling has been limited within the specific power consumer category.

“Under the new regulations, if you are a residential consumer, you cannot wheel to a consumer in the commercial category. In Kerala, many houses have installed rooftop solar, and they wheel power to small shops as they lack roof space for a solar installation,” Shaffeeq said.

The draft also limits the use of daytime banked power during peak times (6 PM to 11:30 PM) to 67% and during off-peak times (11:30 PM to 6 AM) to 85%.

Alex noted that most people in Kerala opted for solar because the retail tariff is expensive, and secondly, because it allows daytime banked power to be used during the peak hours.

DISCOM Rationale

Shaffeeq said that the move comes in the background of Kerala’s distribution companies (DISCOMs) having stranded power due to solar generation from rooftops.

Rooftop installers disagree that curtailing solar energy is due to overloading of the grid infrastructure.

“When only 229,000 consumers have installed solar out of 14.6 million, how can this small percentage of 1.75 impact the grid?” Shafeeq said.

He noted that when DISCOMs purchase power from other states, they require substantial grid infrastructure, pay transmission costs, and additional charges for converting from high tension to low tension (LT). However, when power is transmitted from one LT connection to another, they do not incur such expenses.

Push for Energy Storage

Rooftop solar installers believe that there are not enough trustworthy battery energy storage companies in the market for DISCOMs to push for energy storage.

“Firstly, we do not have proven battery brands. We have been developing hybrid projects for the last four to five years, but we have been seeing issues with lithium-ion batteries. So, Kerala cannot be the testing laboratory for battery energy storage systems (BESS) deployment,” added Shaffeeq.

Rooftop installers also question the viability of adding energy storage to rooftop solar.

Alex noted that if you want to install a rooftop solar system up to 5 kW, you need to add 30% energy storage. “This will add another 30% to 40% to the installation cost, which will stretch the return on investment to more than 10 years. By that time, you might even have to replace the batteries.”

He said that the average cost to set up a grid-connected 5 kW rooftop solar system is ₹330,000 (~$3,785).

“If you add the batteries, it is going to be another ₹150,000 (~$1,721), which will take the cost up to ₹480,000 (~$5,506), pushing the ROI to more than 10 years,” added Alex.

Rooftop installers suggested that DISCOMs should integrate BESS into the transmission line before asking the prosumers to install it.

Need for an Interim Order

Mathew said the industry expects a favorable policy revision; otherwise, the slowdown will continue. “The existing consumers should not be affected by the policy, and the regulatory commission should issue an interim order in case of further delay in policy implementation, since EPCs are already in a bad situation.”

Shaffeeq stated that there must be a phased implementation of this regulation.

“Currently, Kerala has a net metering facility for rooftop solar systems of up to 1,000 kW. It can possibly be halved to 500 kW for a period of two years. Further, it can be reduced to 200 kW and then to 100 KW. Nearly 21 states are providing net metering facilities, and Maharashtra is even allowing up to 5 MW,” said Shafeeq.

A group of solar prosumers, domestic on-grid solar power prosumers, had filed a petition with the Kerala High Court, demanding that KSERC hold a physical hearing to consider stakeholder comments on the draft KSERC order. The recent Kerala High Court order in favour of the petitioners has sparked hope among solar prosumers that they will receive a fair amendment to the KSERC order.