Setting Up a Solar Power Plant in India: A Comprehensive Guide

Posted On - 31 May, 2024 • By - Pooja Chatterjee


India, with its ambitious renewable energy targets, has become a hotspot for solar power investments. As of recent years, the country has been focusing heavily on increasing its solar power capacity to reduce carbon emissions and dependence on fossil fuels. Setting up a solar power plant in India involves a multi-faceted approach encompassing legal, financial, and technical dimensions. This article provides a detailed roadmap for entrepreneurs and investors looking to venture into solar power projects in India.

Feasibility Study

Before embarking on the project, conducting a thorough feasibility study is crucial. This involves assessing solar radiation levels, land availability, grid connectivity, and environmental impacts. The feasibility study helps in understanding the technical and economic viability of the project.

Key considerations include:

Solar Radiation: Evaluating the solar insolation levels to ensure the location receives adequate sunlight.

Land: Identifying and assessing potential land parcels for suitability.

Grid Connectivity: Analyzing the proximity and capacity of the grid to handle additional power input.

Company Registration

The first legal step is to register a company in India. Most solar projects are undertaken by private limited companies due to their favorable legal structure. The registration process involves:

Incorporation: Filing for incorporation with the Registrar of Companies (ROC) under the Ministry of Corporate Affairs.

Documentation: Preparing necessary documents including Memorandum of Association (MOA) and Articles of Association (AOA).

Compliance: Ensuring compliance with the Companies Act, 2013.

Land Acquisition

Acquiring land is one of the most critical steps in setting up a solar power plant. The process involves several steps:

Identifying Suitable Land: The land should have high solar insolation, be relatively flat, and not prone to flooding.

Legal Due Diligence: Conducting thorough legal due diligence to ensure clear title and absence of legal disputes.

Conversion of Land Use: If the identified land is agricultural, obtaining permission for change of land use from the local authorities is essential.

Leasing or Purchasing: Depending on the budget and long-term plans, decide whether to lease or purchase the land.

Permits and Clearances

Several permits and clearances are required from various government bodies to proceed with the project:

Land Use Clearance: Clearance from local authorities for the intended use of the land.

– Connectivity Diagram and Single Line Diagram of Plant

Grid Connectivity: Approval from the state electricity board for grid connectivity.

CEIG Approval: Approvals from the Chief Electrical Inspector for synchronisation 

Building Permits: Local municipal permits for construction.

State and Central Incentives: Applying for available incentives and subsidies from both state and central governments.


Securing financing is a critical aspect of solar power projects. Financing can be obtained through:

Equity Financing: Raising capital by offering equity shares to investors.

Debt Financing: Securing loans from banks and financial institutions. India offers several green financing options and loans for renewable energy projects.

Subsidies and Incentives: Utilizing government schemes such as the Central Financial Assistance (CFA) under the National Solar Mission.

Power Purchase Agreement

A Power Purchase Agreement (PPA) is a contract between the solar power producer and the buyer of the electricity. The PPA outlines:

Terms of Sale: The duration, price, and quantity of electricity to be supplied.

Payment Terms: Payment schedules and penalties for delays.

Termination Clauses: Conditions under which the agreement can be terminated by either party.

Project Development and Design

Site Assessment: Detailed site assessments including topographical surveys, soil testing, and wind load analysis.

System Design: Engineering design to optimize the layout, including the positioning of solar panels for maximum efficiency.

Selection of Technology: Choosing the appropriate photovoltaic (PV) technology, inverters, and other equipment based on efficiency, cost, and reliability.

Energy Yield Calculations: Estimating the annual energy production based on local solar irradiance data.

Construction and Commissioning

Once the design is finalized, the construction phase begins. This includes:

Procurement: Sourcing of solar panels, inverters, mounting structures, and other components.

ALMM Compliance: Ensuring that all PV modules selected are listed in the Approved List of Models and Manufacturers (ALMM), as mandated by the Ministry of New and Renewable Energy.

Civil Works: Preparing the site, including land leveling, and constructing support structures for the panels.

Electrical Works: Installing electrical infrastructure including cabling, inverters, and connection to the grid.

Testing: Conducting pre-commissioning tests to ensure all systems are functioning correctly.

Commissioning: Officially commissioning the plant and starting commercial operations.

Operations and Maintenance

Maintaining the solar power plant is essential for its long-term success:

Routine Maintenance: Regular cleaning of solar panels, inspection of electrical components, and monitoring of system performance.

Repairs and Replacements: Addressing any component failures promptly to minimize downtime.

Performance Monitoring: Continuous monitoring of the plant’s performance using software tools to ensure it operates at optimal efficiency.

Compliance and Reporting

Adhering to regulatory requirements and reporting obligations is mandatory:

Regulatory Compliance: Ensuring compliance with local, state, and national regulations.

Reporting: Regular reporting to regulatory bodies on performance, environmental impact, and any incidents.

Renewable Purchase Obligations (RPOs): Meeting RPO targets if applicable, which may involve selling Renewable Energy Certificates.

Taxes and Incentives

Understanding the tax implications and available incentives can significantly impact the financial viability of the project:

Goods and Services Tax (GST): Solar power projects attract a GST on various components; however, certain exemptions and reductions may apply.

Income Tax Benefits: Availing benefits under Section 80-IA of the Income Tax Act for infrastructure projects, including solar power plants.


Setting up a solar power plant in India involves navigating a complex landscape of legal, financial, and technical requirements. From conducting a feasibility study and securing land to obtaining necessary permits, financing the project, and ensuring compliance, each step is critical to the project’s success. By understanding and effectively managing these factors, investors can contribute to India’s renewable energy goals while achieving profitable and sustainable energy production.

Contributed by – Mukund Gupta

King Stubb & Kasiva,
Advocates & Attorneys

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