Solar for SEZs in India: Rules, Benefits & How to Start

Key Takeaways

• India has 368 notified Special Economic Zones (SEZs) as of February 2026 — industrial enclaves with unique regulatory treatment, including for electricity procurement
• Solar energy for SEZ units faces a distinct regulatory overlay: SEZ Rules 2006 govern electricity within the zone, and state electricity regulations may apply differently inside the SEZ boundary
• Rooftop solar within SEZs is generally eligible for net metering under state SERC orders, but state Electricity Regulatory Commissions (ERCs) have the authority to remove capacity limits and allow third-party roof-leasing models specifically for SEZs
• Open access solar (off-site power from a solar farm delivered via the grid) is available to SEZ units that meet the state's minimum load threshold (typically 1 MW or above, state-dependent)
• SEZs are energy-intensive manufacturing clusters — their aggregate solar potential is enormous and remains significantly underutilised
• ALMM List-II (in effect from June 1, 2026) now applies to all solar installations including those within SEZs — modules used must contain domestically manufactured solar cells from MNRE-approved manufacturers

India's Special Economic Zones are home to some of the country's most energy-intensive export-oriented industries — electronics manufacturing, pharmaceuticals, apparel, chemicals, gems and jewellery, and IT/ITeS. With electricity costs forming a significant share of production costs, solar energy adoption within SEZs offers the same financial logic as in any industrial facility — but with a distinct regulatory context that requires careful navigation.

This guide covers what SEZ units need to know about solar energy procurement in 2026: what's permitted, what isn't, and how to structure a solar investment that works within the SEZ framework.

What Is a Special Economic Zone (SEZ) in India?

A Special Economic Zone is a geographically demarcated area within India treated as a deemed foreign territory for customs purposes but as domestic territory for other regulatory purposes. SEZs are governed by the SEZ Act, 2005 and the SEZ Rules, 2006, administered by the Department of Commerce (Ministry of Commerce and Industry).

As of February 2026, India has 368 notified SEZs across various states, with concentrations in:

• Tamil Nadu — IT, electronics, pharma
• Karnataka — IT/ITeS, biotechnology
• Andhra Pradesh / Telangana — pharma, electronics
• Gujarat — chemicals, textiles, gems and jewellery
• Maharashtra — IT, engineering
• Haryana / NCR — IT, garments, electronics

SEZ units are primarily export-oriented enterprises (EOUs within an SEZ). They enjoy duty-free import of capital goods and raw materials, income tax benefits, and simplified regulatory procedures in exchange for export obligations.

Solar Energy Within SEZs — The Regulatory Framework

Electricity Governance Inside SEZs

Electricity supply within an SEZ falls into a nuanced regulatory space:

• The SEZ Developer (the entity that owns and operates the SEZ infrastructure) is responsible for providing electricity to SEZ units
• In many SEZs, the developer procures power from the state DISCOM or captive sources and distributes it internally — making the developer an internal electricity supplier
• SEZ units can, in principle, also source electricity directly from external suppliers (including open access solar farms) provided the arrangement is approved by the Development Commissioner and complies with state SERC regulations
• Electricity generated within the SEZ (by a rooftop or ground-mount solar plant on an SEZ unit's rooftop or land) is generally treated as captive power — consumed by the unit itself

Net Metering for SEZ Rooftop Solar

Net metering regulations are issued by state SERCs and apply within the DISCOM's distribution area. The applicability of net metering to SEZ units depends on whether the SEZ unit receives its electricity from the state DISCOM (in which case the DISCOM's net metering rules apply) or from the SEZ developer's internal distribution network (in which case the rules may differ).

Key regulatory developments:

• State ERCs have the authority to remove capacity restrictions on net metering programs specifically for SEZ units and to approve third-party roof-leasing models (where a solar developer installs panels on an SEZ unit's rooftop and sells power to the unit under a lease or PPA)
• Maharashtra (MERC, 2023 amendment): MERC amended its Distribution Open Access Regulations to allow C&I consumers — including SEZ units receiving DISCOM power — to simultaneously use both rooftop net metering and open access power procurement. This is a significant liberalisation that had not been permitted previously.
• Karnataka (KERC): Karnataka allows open access solar for large consumers, including SEZ units above the state's threshold, subject to standard open access charges

Open Access Solar for SEZ Units

Open access solar allows an SEZ unit (or any large industrial buyer) to procure solar power from an off-site solar farm via the state or interstate transmission grid, paying applicable wheeling, transmission, cross-subsidy surcharge, and other charges. The solar electricity is delivered to the SEZ's electricity meter — net of transmission losses.

Eligibility: Most states allow open access for consumers above 1 MW connected or contracted demand (some states set it at 500 kW). Many SEZ units, especially in manufacturing, electronics, and chemicals, comfortably exceed this threshold.

Charges applicable (state-specific):

• Wheeling charges (state grid use)
• Transmission charges (if interstate)
• Cross-subsidy surcharge (partially waived in some states for renewable energy open access)
• Banking charges (for solar energy stored in the grid during daytime for use at night)

For large SEZ units with electricity bills above ₹50 lakh/month, open access solar is often the most cost-effective route, delivering electricity at effective rates of approximately ₹2.50–4.50/unit all-in depending on the state, compared to DISCOM industrial tariffs of ₹6–10/unit in most major states.

For detailed open access information, see: Open Access Solar India: Complete Guide for Industrial Buyers.

Rooftop Solar Within SEZs — What's Permitted

For SEZ units with available rooftop space (typically electronics assembly, garments, pharma packaging, IT office buildings), rooftop solar is straightforward in most cases:

CAPEX Rooftop Solar (Self-Ownership)

The SEZ unit installs solar panels on its own rooftop, owns the system, and consumes the power. This is the cleanest arrangement — no third-party complications, full depreciation benefits (including accelerated depreciation under Section 32 of Income Tax Act), and direct energy cost savings. The unit can also potentially earn Renewable Energy Certificates (RECs) for captive solar power consumed internally.

RESCO / OPEX Rooftop Solar (Zero Investment)

A solar developer (like Sun Wave Technologies) installs panels at no upfront cost, owns the system, and sells electricity to the SEZ unit at a pre-agreed per-unit tariff — typically 15–25% below the prevailing DISCOM tariff. The SEZ unit gets clean power without capital outlay. This model is increasingly popular in SEZs where units do not want to tie up capital in solar assets.

Third-Party Roof Leasing

In this model, a solar developer installs panels on the SEZ unit's rooftop and pays a roof rent to the unit, while selling the solar electricity either to the unit itself or back to the grid. State ERCs have the authority to specifically approve this model for SEZs, and several states have done so.

ALMM List-II Compliance for SEZ Solar Projects

From June 1, 2026, all solar modules installed in India — including within SEZs — must comply with the ALMM (Approved List of Models and Manufacturers) framework:

• ALMM List-I: Module-level approval — the module brand and model must be on the MNRE-approved list
• ALMM List-II: Cell-level approval — the solar cells inside the module must be manufactured by MNRE-approved domestic cell makers

This compliance requirement applies to all solar installations covered under government subsidies, net metering, and open access frameworks. For SEZ units procuring under a private RESCO arrangement (no government subsidy involved), the ALMM requirement technically applies where the power is drawn from the DISCOM grid for net metering or open access settlement.

Practical implication: When selecting an EPC contractor for a solar project inside an SEZ, confirm they source modules from ALMM List-I approved brands using List-II compliant cells. Reputable domestic brands such as Waaree Energies, Adani Solar, Vikram Solar, and Tata Power Solar are ALMM compliant. Importing Chinese modules without ALMM List-II compliant cells is no longer permitted for regulated connections.

For details on the ALMM mandate: ALMM Mandate 2026: Impact on Indian Solar Projects.

Financial Benefits of Solar for SEZ Units

The financial case for solar within SEZs mirrors the broader industrial solar case, with some SEZ-specific advantages:

1. Electricity Cost Reduction

Industrial electricity tariffs in major SEZ states range from ₹6.50 to ₹10/unit. Rooftop solar can displace 30–80% of daytime consumption at an effective cost (after amortising system cost) of approximately ₹2.50–4.00/unit over 25 years. Open access solar delivers electricity at approximately ₹2.50–4.50/unit all-in (including grid charges), versus ₹6–10/unit from DISCOM.

2. Accelerated Depreciation Benefit

Solar assets owned by SEZ units qualify for 40% accelerated depreciation in the first year under the Income Tax Act — significantly reducing taxable profit in Year 1 for companies that are profitable. This benefit is available only on CAPEX (owned) solar systems, not RESCO/OPEX arrangements.

For more: Accelerated Depreciation for Solar in India: Complete Guide.

3. REC Revenue

SEZ units with captive solar plants that consume their own power can register for Renewable Energy Certificates (RECs) through the NLDC REC Registry. Each MWh of solar energy consumed internally can generate one REC, tradable on IEX or PXIL monthly. This provides an additional revenue stream of variable value on top of electricity savings.

For more on RECs: Solar RECs: How Indian Factories Trade Green Certificates.

4. Sustainability / ESG Reporting

Export-oriented SEZ units face growing pressure from international buyers (particularly in EU and US markets) to demonstrate renewable energy use. Documenting solar electricity consumption — and backing it with RECs or I-RECs — strengthens ESG credentials required for global supply chain compliance.

5. Energy Security and Tariff Hedging

Industrial electricity tariffs have risen steadily across India — DISCOM tariffs in Gujarat rose up to 9% in FY26, and similar increases are being seen across states. A 25-year solar PPA at a fixed tariff (under RESCO) or a paid-off owned system provides insulation from future tariff increases.

Sample Solar Configuration for an SEZ Unit

Consider a mid-size electronics manufacturing unit within an SEZ in Haryana with:

• Connected load: 2 MW
• Monthly electricity consumption: 800,000 units (800 MWh)
• Current DISCOM tariff: ₹8.00/unit (HT industrial)
• Monthly electricity bill: ₹64 lakh

Option A — 1 MW Rooftop Solar (CAPEX)

• System cost: approximately ₹3.8–4.2 Cr for 1 MW (post-ALMM List-II compliance)
• Annual generation: approximately 1,500–1,700 MWh (15–17 lakh units)
• Annual savings: approximately ₹1.20–1.36 Cr (at ₹8/unit displaced)
• Payback period: approximately 3–3.5 years (before accelerated depreciation benefit)
• With accelerated depreciation (40% in Year 1), effective payback can reduce to approximately 2.5 years for profitable companies

Option B — Open Access Solar (RESCO, 1 MW)

• Zero upfront investment
• Solar tariff from developer: approximately ₹4.50–5.00/unit (fixed for 25 years)
• Annual savings vs DISCOM: approximately ₹3.00–3.50/unit × 15–17 lakh units = ₹45–60 lakh/year
• No capital expenditure required

Most SEZ units with available rooftop space and profitable P&L opt for CAPEX to capture the accelerated depreciation benefit. Units with constrained balance sheets or under private equity ownership (where capital efficiency is prioritised) often prefer RESCO.

Steps to Install Solar in an SEZ Unit

1. Assess your load and rooftop: Get a load analysis (monthly consumption pattern, peak demand timing) and a rooftop feasibility assessment (available area, structural load bearing, shading analysis)

2. Choose your procurement model: CAPEX (self-owned), RESCO/OPEX (zero investment, pay per unit), or Open Access (off-site solar farm via grid)

3. Check Development Commissioner / SEZ Authority approval requirements: Depending on the SEZ, installations may require notification or approval from the Development Commissioner. Get confirmation that the solar installation does not conflict with any zone-level power supply arrangement

4. Select an ALMM-compliant EPC contractor: Ensure your EPC partner sources ALMM List-I modules with ALMM List-II compliant cells. Request certificates from the EPC before signing contracts

5. Apply for DISCOM connection amendment (if net metering): If you plan to export surplus power, apply for net metering through the relevant DISCOM or SEZ power supply authority

6. Commission and register for RECs (optional): After commissioning, register on the NLDC REC Registry if you want to monetise the renewable attribute of your generation

7. Monitor performance: Use a cloud-based monitoring system to track actual vs expected generation and flag any underperformance early

For guidance on choosing an EPC contractor: How to Choose a Solar EPC Company in India.

Frequently Asked Questions

Q: Can an SEZ unit in India install solar on its rooftop? Yes. SEZ units can install solar panels on their rooftop under the CAPEX (self-owned) or RESCO (developer-owned) model. The solar system is treated as a captive power source. Most state SERCs permit this without restriction for self-consumption. If net metering (grid export) is desired, DISCOM approval is typically required.

Q: Does the SEZ Act restrict solar energy procurement from outside the zone? The SEZ Act's primary restrictions relate to customs (SEZs are deemed foreign territory for customs purposes). Electricity procurement from outside the zone via open access is governed by state electricity regulations and is generally permitted subject to the applicable open access approval process and charges. Confirm with your SEZ's Development Commissioner.

Q: Are ALMM-compliant modules available for SEZ projects in 2026? Yes — major Indian module manufacturers including Waaree Energies, Adani Solar, Vikram Solar, RenewSys, and Tata Power Solar are ALMM List-I compliant and increasingly producing modules with List-II compliant domestic cells. Your EPC contractor should provide ALMM compliance certificates for all modules procured.

Q: Can an SEZ unit claim accelerated depreciation on a solar installation? Yes — the 40% accelerated depreciation benefit under Section 32 of the Income Tax Act is available to any taxpayer (including SEZ units) that owns a solar energy asset. SEZ units operating under income tax exemptions may not benefit from depreciation unless they have taxable profits — verify your unit's specific tax position with your CA.

Q: Can SEZ units sell solar power to neighbouring units within the same zone? This depends on the SEZ's internal distribution arrangement. In SEZs where the developer has an internal distribution licence, peer-to-peer power sharing between units may require the developer's consent or a specific regulatory arrangement. Some large SEZ developers are exploring internal renewable energy sharing frameworks, but this is not yet uniformly regulated. Consult with your SEZ authority.

Q: Is open access solar available for smaller SEZ units below 1 MW? Open access eligibility thresholds vary by state — typically 1 MW (some states 500 kW). Smaller SEZ units that do not meet the minimum load threshold cannot directly use open access. Group captive arrangements (multiple units jointly owning a solar plant) are an alternative worth exploring for smaller units.

Q: Do international buyers (EU/US) accept Indian RECs for supply chain ESG reporting? Indian RECs (CERC framework) are recognised for Indian compliance purposes (RPO). For international ESG and GHG Protocol reporting, many multinational buyers prefer I-RECs (International Renewable Energy Certificates) or other internationally recognised instruments. If your supply chain ESG requirement is from a global buyer, confirm which certificate standard they accept. Some solar developers in India can issue both RECs and I-RECs for the same generation.

Key Takeaways for SEZ Solar Buyers

The most important conclusion for SEZ units considering solar: captive rooftop solar (CAPEX model) is the best starting point for most SEZ units — it is the simplest, fastest, and most financially sound path to reducing electricity costs with zero regulatory complexity around SEZ boundaries or customs.

In short, for SEZ units procuring power from the SEZ developer at commercial rates of ₹8-11/unit, captive solar generates power at ₹1.80-2.40/unit LCOE, making solar the primary tool for sustainable cost reduction. The bottom line is that solar integration with an SEZ unit's operations is both financially attractive and increasingly necessary for global supply chain ESG compliance.

The key result for SEZ operators who have completed solar installations: a 500 kW rooftop system at an SEZ manufacturing unit delivering 700,000 units/year saves approximately ₹56-77 lakh annually — a payback of 2.5-3.5 years depending on the SEZ electricity tariff.

Sources

• WRI India — Special Economic Zones: An Opportunity to Double India's Onsite Solar Capacity: wri-india.org
• Ministry of Commerce & Industry — SEZ India: sezindia.gov.in
• Mercom India — Policy & Regulatory Changes in Solar Open Access, Q3 2025: mercomindia.com
• MNRE — ALMM List-II Implementation Clarification, June 15, 2026
• CERC / NLDC REC Registry: recregistryindia.nic.in