Karnataka’s power regulator has finalized rules that raise the net metering ceiling for distributed solar to 1 MW across all consumer categories and remove a draft mandate requiring batteries on projects above 10 kW, clearing a major hurdle for commercial and industrial rooftop installations in one of India’s most solar-active states.
Regulatory Backdrop and the Shift from Draft to Final
The Karnataka Electricity Regulatory Commission (KERC) published its draft Grid Interactive Distributed Solar Photovoltaic Plants Regulations in late 2024 with two provisions that drew sharp industry pushback: a 500 kW cap on net metering eligibility and a requirement that any DSPV system larger than 10 kW integrate energy storage. The final 2026 regulations, notified in May, double the capacity threshold to 1 MW and reclassify storage as optional rather than compulsory. The Commission also extended net metering to all consumer classes – residential, commercial, industrial, and institutional – whereas earlier frameworks restricted it largely to residential and small commercial users.
Karnataka’s installed rooftop solar capacity stood at roughly 2.3 GW as of March 2025, according to state agency data, placing it among the top three states nationally. Yet the segment has grown unevenly: residential uptake remains modest while commercial and industrial (C&I) consumers, who account for the bulk of demand, have been constrained by the previous 500 kW net metering limit and by banking charges that erode project economics. The new 1 MW ceiling aligns with the typical load profile of mid-sized factories, hotels, hospitals, and educational campuses, allowing a single behind-the-meter system to offset a far larger share of on-site consumption.
The storage mandate’s removal is equally significant. The draft rule would have forced developers to add battery capacity – typically 25-30% of solar nameplate – on any project above 10 kW, adding an estimated ₹2.5-3.5 crore per MW of solar at current lithium-ion pack prices. For a 500 kW rooftop plant, that implied ₹1.25-1.75 crore in incremental capital expenditure, pushing levelized cost of electricity (LCOE) above grid tariffs for many C&I consumers. By making storage optional, KERC has effectively acknowledged that grid-scale flexibility and time-of-day tariffs, not behind-the-meter batteries, are the primary tools for managing solar intermittency at this stage of Karnataka’s transition.
Implications for Discom Finances and Grid Operations
That points to a deliberate balancing act by the regulator between distributed generation growth and distribution utility (discom) revenue protection. Karnataka’s discoms – BESCOM, HESCOM, MESCOM, GESCOM, and CESC – have long argued that net metering at high penetration shifts fixed network costs onto non-solar consumers, worsening their already fragile finances. The 1 MW cap, while generous, still imposes a hard boundary: projects above that size must sell power under gross metering or power purchase agreements at avoided-cost rates, which are typically ₹2.50-3.00/kWh versus retail tariffs of ₹7-9/kWh for C&I users. This preserves a revenue floor for discoms while giving developers a clear economic signal to right-size systems to on-site load.
If this trend holds, other states with high C&I solar potential – Maharashtra, Gujarat, Tamil Nadu – may follow Karnataka’s lead in raising net metering caps while resisting storage mandates. Maharashtra’s MERC currently allows net metering up to 1 MW but only for residential and institutional consumers; Gujarat caps it at 500 kW across the board. A harmonized 1 MW national threshold, long advocated by the Ministry of New and Renewable Energy, would simplify interstate project development and reduce transaction costs for national EPC players.
From a grid operations standpoint, the optional-storage approach shifts the integration burden to the system operator. Karnataka’s peak solar generation already exceeds 12 GW on clear days, creating pronounced duck-curve ramps that require fast-ramping hydro, gas, or battery resources. The state has contracted roughly 1.2 GW of standalone battery storage and 800 MW of solar-plus-storage hybrids, but most are utility-scale front-of-meter assets. Behind-the-meter storage, had it been mandated, would have provided localized voltage support and reduced distribution transformer loading – benefits that now must be procured through alternative mechanisms such as dynamic tariffs or distribution-level flexibility markets.
Who This Affects
- C&I developers and EPCs: Can now design single rooftop systems up to 1 MW without splitting projects across multiple net metering connections, reducing balance-of-system costs by an estimated 8-12% per MW and simplifying permitting.
- Discom commercial teams: Gain a defined cap that limits revenue erosion from net metering while still meeting state rooftop targets; should prioritize time-of-day tariff designs to recover fixed costs from solar owners during evening peaks.
- Storage integrators: Lose a guaranteed behind-the-meter pipeline but gain flexibility to pitch batteries on economic merit – arbitrage, backup, power quality – rather than regulatory compliance, shifting sales cycles toward value-stacking models.
- State policy planners: Have a template for aligning net metering limits with typical C&I contract demands, potentially accelerating Karnataka’s 2030 rooftop target of 6 GW without triggering discom opposition.
What to Watch Next
- KERC’s forthcoming time-of-day tariff revision for C&I consumers, expected by Q3 2025, which will set the price signals determining whether optional storage pencils out on a merchant basis.
- Discom filings for true-up of net metering settlements under the new 1 MW cap – watch for any petition to introduce grid-support charges or increase fixed-demand components.
- Adoption rate of the new 500 kW-1 MW band: track quarterly rooftop capacity additions in this segment via KREDL dashboards to gauge whether the higher ceiling unlocks latent demand.
- Whether the Central Electricity Regulatory Commission (CERC) references Karnataka’s final regulations in its ongoing review of the national net metering framework, due for completion by end-2025.
Bottom line: Karnataka has removed the two biggest regulatory frictions for mid-scale rooftop solar – capacity caps and forced storage – betting that market-driven adoption, backed by smarter tariffs, will deliver its 6 GW target faster than prescriptive mandates.
Read the full report at Mercom India
Note: facts and figures attributed above to Mercom India (Indian solar & clean energy business news) reflect that outlet's original reporting. Broader context, cross-sector connections, and forward-looking scenarios reflect independent analysis by our editorial team.
About this article: Drafted by Energy Ai with AI-assisted research and writing based on public reporting, then reviewed under our editorial process before publication.
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