The future of solar energy stocks in India: Growth potential and challenges in 2025
The solar energy sector in India has seen an uptick in growth due to two factors, mainly the government initiatives and subsidies, that help the development and the growing awareness and demand for solar energy in commercial and retail sectors alike.
But that doesn’t mean the sector is without its challenges. Considering the pros and cons, how are solar energy stocks expected to fare in India? Read on to find out.
Solar energy sector overview in India
India carries a lot of potential for the solar energy sector. Blessed with an average of over 300 sunny days in most parts, the country can easily take advantage of solar power.
India's total installed solar capacity has reached 98.7 GW, with plans to achieve 500 GW of renewable energy capacity by 2030. Solar power accounted for 73% of new power capacity additions in 2024, solidifying its role as a cornerstone of India's clean energy transition.
What helps the growth of the solar sector in India?
The fundamental reason that helped the growth and penetration of solar in India could be the government subsidies. These policies helped the common people with access to solar energy sources in an affordable manner. Below are some such initiatives:
Key government solar subsidies in India
The Indian government has introduced a range of subsidies and incentives to promote the adoption of solar energy. Below is a table summarising the key schemes and their benefits:
| Subsidy/Program | Details | Benefits |
|---|---|---|
PM Surya Ghar Muft Bijli Yojana | Provides up to 60% subsidy for rooftop solar systems up to 2 kW and 40% for 2-3 kW systems. | Reduces electricity bills by up to ₹15,000 annually; surplus power can generate additional income. |
Grid Connected Rooftop Solar Program (Phase II) | Offers 40% subsidy for systems up to 3 kW and 20% for 3-10 kW systems. | Direct financial assistance through DISCOMs; supports residential and communal installations. |
Production-Linked Incentive (PLI) Scheme | Extended with a $24,000 crore outlay to boost domestic solar module manufacturing. | Reduces reliance on imports; incentivizes local production and job creation. |
Capital Subsidy for Institutions | Available for educational institutions, healthcare facilities, and public sector buildings. | Lowers installation costs for non-commercial entities; promotes solar adoption in public infrastructure. |
Tax Benefits for Developers | Includes accelerated depreciation and tax holidays extended by five years. | Reduces tax liabilities, improving project viability for developers. |
Solar Waste Management Policy | Introduced in Budget 2025 to recycle end-of-life solar panels sustainably. | Encourages circular economy practices, ensuring long-term sustainability in the sector. |
Other key drivers
-
Government policies: Initiatives like the Production-Linked Incentive (PLI) scheme and subsidies for rooftop solar installations have spurred investment.
-
Technological advancements: The adoption of smart grids and AI-driven energy management systems is optimising solar power distribution.
-
Global demand: Rising international interest in renewable energy has boosted India's export potential for solar modules and technology.
What influences the performance of top solar stocks?
1. Rising demand for domestic manufacturing: Companies like Borosil Renewables benefit from government efforts to reduce reliance on imports.
2. Focus on large-scale projects: Adani Green Energy leads in utility-scale projects, while Tata Power Solar excels in both rooftop and large-scale segments.
3. Technological innovation: Firms investing in advanced technologies like heterojunction cells are better positioned to compete globally.
Growth potential of solar energy stocks
-
PLI scheme extension: The ₹24,000 crore outlay aims to strengthen domestic manufacturing by incentivising production.
-
Rooftop solar incentives: Subsidies and net metering policies are promoting decentralised power generation.
-
Grid modernisation funding: ₹5,000 crore has been allocated to improve grid stability and integrate intermittent renewable sources.
Companies like Adani Green Energy and Tata Power Solar are increasingly exporting their products and expertise. The global push for clean energy provides Indian firms with opportunities to cater to rising demand for affordable solar solutions.
Challenges facing India's solar stocks
- India relies heavily on imports for polysilicon, wafers, and other critical components. This dependence increases costs and exposes the sector to geopolitical risks.
- Setting up manufacturing units or large-scale projects requires substantial capital. The long payback period can deter investors seeking quick returns.
- Integrating intermittent renewable sources into the grid remains a challenge. Investments in infrastructure modernisation are necessary but time consuming.
- Delays in securing approvals for land acquisition or project execution can impact timelines and revenue generation.
- Fluctuations in stock prices due to policy changes or global market conditions add an element of risk for investors.
How to invest in India's solar energy stocks?
1. Company fundamentals: Assess financial metrics like revenue growth, profitability, and debt levels.
2. Order book size: A strong pipeline of projects indicates future earnings potential.
3. Alignment with policies: Companies benefiting from government schemes or subsidies are likely to perform better.
4. Technological edge: Firms investing in R&D or adopting advanced technologies have a competitive advantage.
5. Diversification within renewables: Companies operating across multiple segments (solar, wind, hybrid) offer more stability.
Conclusion
The future of India's solar energy stocks looks bright but not without challenges. In 2025, the sector is poised for significant growth driven by government initiatives, increasing global demand for clean energy, and technological advancements.
For investors like you, this is an exciting time to explore opportunities in India's renewable energy market. Companies such as Adani Green Energy, Tata Power Solar, Borosil Renewables, Suzlon Energy, and Websol Energy Systems, among many others, offer diverse options depending on your risk appetite and investment horizon.
FAQs
Is solar energy stock in India a good investment?
Yes, Indian solar energy stock has good growth prospects because of government incentives, increasing demand for renewable energy, and technological advances. But before investing, consider risks such as market fluctuations and supply chain relationships.
What are the key drivers of performance of solar energy stocks?
Government policies, order book size, technology innovation, export possibilities, and the ability of the company to deal with supply chain issues are key drivers.
What is the main risk that the sector carries?
One of the main risks that solar sector stocks in India carry is the heavy reliance on imported raw materials and solar panels.
This article is for informational purposes only and does not constitute financial advice. It is not produced by the desk of the Kotak Securities Research Team, nor is it a report published by the Kotak Securities Research Team. The information presented is compiled from several secondary sources available on the internet and may change over time. Investors should conduct their own research and consult with financial professionals before making any investment decisions. Read the full disclaimer here.
Investments in securities market are subject to market risks, read all the related documents carefully before investing. Brokerage will not exceed SEBI prescribed limit. The securities are quoted as an example and not as a recommendation. SEBI Registration No-INZ000200137 Member Id NSE-08081; BSE-673; MSE-1024, MCX-56285, NCDEX-1262.
