The solar revolution on India’s rooftops is gaining momentum.

The country added more rooftop solar power capacity in the last financial year than in the previous four years combined, making it the fastest-growing segment in the country’s clean energy space. During the financial year 2017, some 715 megawatts (MW) of systems were added, up from 227 MW in the previous year, taking the country’s total installed capacity to 1.3 gigawatts (GW, 1 GW = 1,000 MW) according to a report (pdf) by Bloomberg New Energy Finance (BNEF). By 2022, the report estimates that the country will have around 9.5 GW of rooftop solar capacity—but that is still substantially short of the Narendra Modi government’s target of 40 GW.

This has happened largely because rooftop solar power is now cheaper than commercial and industrial power in all major Indian states, according to BNEF. Besides, costs have halved over the last five years. Overall, because of increased competition and low solar panel prices, setting up rooftop systems has become cheaper than the global average by between 39% and 50% in India.

“If a mall is purchasing power from (a) grid at Rs8-9 (per unit)…going by (the) rooftop model, the power cost will be half of that. So it is a viable proposition,” Gautam Bafna, an analyst at CARE Ratings who tracks the renewables sector, told Quartz.

Government incentives and policies to push rooftop solar installations have also contributed to the growth over the last year, Bafna added. For instance, the government has held auctions to have companies set up over 1 GW of rooftop projects in the first nine months of 2017.

Meanwhile, the size of installations is getting bigger as well. The average size of a rooftop system has increased from 250 kilowatts (kW) in 2015 to 855 kW in 2018, according to BNEF. This is due to better utilisation of rooftop space and consumers’ willingness to use power generated from their own buildings rather than purchase the power from elsewhere, the report said.

Lagging behind

So far, only 3% of the government’s 40 GW target has been achieved, and more than half the market is concentrated in just six states, BNEF pointed out in its report. Among the reasons for this is a lack of clarity on the “net metering” programme, which allows users to sell surplus power generated from their rooftop systems back to the electricity utility.

Today, most of the growth in the rooftop segment is driven by commercial and industrial users. The economics work for them even without net metering, given the fall in costs of installation and reduction in energy prices. On the other hand, the residential segment hasn’t taken off. “The high upfront capital expenditure compared to commercial and industrial (C&I) consumers, a lack of financing options, and cheaper grid electricity for residential consumers with low consumption currently make rooftop PV (photo voltaic) less attractive for residential consumers than their C&I counterparts,” BNEF said.

Net metering is important for residential consumers as their panels create a lot of surplus power during the day when the households themselves draw less power. While net metering is mandatory in many states, it is unregulated in states like Andhra Pradesh, Odisha, Tamil Nadu, and West Bengal, where they only have legally non-binding guidelines. “Though the government has come out with net metering policy at lots of states, at the same time, practically, there are challenges in implementing,” Bafna said.

India’s power distribution companies, or discoms, aren’t keen on promoting rooftop solar power as that would hurt their finances. Most Indian discoms are owned by the government and suffered cumulative losses of $67 billion at the end of financial year 2015, as per BNEF. There are technological challenges, too. Not many discoms have the systems to allow feeding the power grid with electricity generated on rooftops. “During the day, there’ll be sudden spikes of generation; in the evenings, there’ll be a reverse flow. So till (power) storage comes in a much larger way, utilities might find it difficult to manage this,” Anish De, a partner with infrastructure and government services at KPMG, told Quartz.