Last fall, I travelled back to my hometown in rural Wen’an County, Hebei Province, and was surprised to find my aunt Lu had installed 12 solar panels on the roof of her house. Because I am a low-carbon policy wonk at a Beijing consultancy, I peppered her with energy questions as we admired the rooftop panels. “So, where does the electricity go? To your own appliances, an aggregator, or the grid company? Are you paid for renting out the roof or for selling the electricity?”
“I don’t know,” my aunt whispered, sounding a bit confused. “The village officials told us to install them, so I did.”
She is not alone. Under a top-down, state-led rollout, over 5 million rural households installed rooftop solar without fully understanding what it could mean for them. In theory, rooftop solar offers energy bill savings, extra income, and greater energy security in places with poor grid connection. In reality, these gains have yet to materialize. For my aunt, the sleek black panels are only a beautiful decoration. 
Only a small part of rural households use their self-generated electricity to power their homes. Most simply feed into the grid. Tapping more economic and low-carbon benefits for China’s rural homeowners would require power market reforms that reward small players, create a strong grid to support flexible energy connections, and incentive a transparent business model that protects everyone’s rights. 
For nearly three decades, China’s massive solar farms have spread like wildfire, connecting to massive transmission lines that power urban and industrial growth. Distributed rooftop solar for rural areas has long been but a whisper in China’s power landscape. In the early 2000s, rooftop photovoltaic (PV) first appeared in China’s countryside through international development pilots to improve rural electricity access. In the 2010s, it expanded as part of domestic poverty-alleviation programs–households could generate electricity for self-use and in theory sell the surplus. 
Rural rooftop solar got a boost in 2020, when President Xi pledged the country would peak carbon emissions by 2030 and reach carbon neutrality by 2060. The government launched a nationwide rooftop PV pilot initiative in 676 rural counties and set installation targets for government,  industrial, and commercial buildings, and homes.
Plunging PV costs and a powerful manufacturing push accelerated the installations. Local governments embraced rooftop solar as it helped meet their renewable energy targets, strengthened local industry, and attracted investment. While not a pilot location, aunt Lu’s Wen’an County also hopped on the bandwagon.
In five years as China’s total electricity production expanded by nearly two-thirds, the rooftop solar results have been striking. By 2025, rooftop PV (28% is residential) became a central pillar of China’s decarbonization, accounting for 44% of the country’s solar capacity.

PV panels have popped up on millions of rural rooftops via three different ownership models that rely on loans, leasing arrangements, and/or third-party investment. For many rural residents, the contracts are opaque and difficult to navigate. A significant share of revenue flows to developers and operators, while households bear uncertainty and receive limited benefits.
My aunt Lu has a simple rooftop lease while many rural households opt for a complex shared-ownership rooftop. For the latter, households sign a contract with a developer (often backed by a financial institution) to install rooftop panels. Residents make payments for 15-20 years with the money generated from selling their rooftop electricity. They keep any surplus earnings. Once the contract ends, the system is transferred to the household. 
This arrangement as a “green finance product” gives developers and financial institutions stable revenues, but households bear debt risks. If the panels underperform or the grid can’t buy their power, they still need to pay for the lease. Residents could reap more economic benefits if they could own the equipment from the beginning and have the rights to use and sell power.  

The rapid rooftop PV buildout is straining local distribution grids. In some areas, power grids cannot absorb additional rooftop generation, forcing pauses on new installations. Grid expansion is costly and tightly controlled by China’s two powerful grid companies, leaving little room for alternative investment or local solutions.
Residential rooftop solar also faces stricter rules on grid connection and electricity sales than commercial or industrial systems, partly because they are more dispersed and lack professional maintenance. 
Rural rooftop solar has not (yet) empowered households with energy independence and economic benefits for householders. Despite the massive rollout, only a small part of Chinese rural households directly use their self-generated electricity to power their homes or home workshops and trade with the grid. My aunt sees a harmless rooftop tenant. I see vast unrealized value, and hard-to-ignore opportunity costs.

For decades, China’s power sector reforms have sought to introduce market mechanisms and loosen grid monopoly structures. Yet progress is slowed by institutional complexity: overlapping administrative mandates, entrenched grid corporations, aggressive developers, and the central government’s priorities for energy security and economic stability.
Among early adopters such as the United States and Germany, households have benefited from a diverse pool of economic returns from rooftop solar. China, along with newer renewable movers such as Pakistan and Indonesia, are building a different kind of power system, shaped by distinct market structures and institutional foundations. With the right policy and market incentives, China’s distributed rooftop solar could become a more participatory and flexible energy system that decarbonizes grids and benefits homeowners. 
Rooftop solar can create bottom-up momentum for power sector change in China, from rural households hosting panels, private developers operating them, manufacturers eager to expand across more roofs, and keen investors who see a gold rush in the convergence of free sun and rapid rural electrification. 
In a redesigned framework, more actors would enter the picture. Solar, together with EVs, smart appliances, and home batteries, would no longer be passive generators feeding into a congested grid. Instead, through local coordinators who pool all the roofs and home resources, these distributed resources could actively provide balancing, flexibility, and real-time interaction with local consumption, forming smart microgrids. The main power grid would need to transform into a comprehensive platform, coordinating flow in and out of households, and integrating various microgrids. Germany has already shown that such an integrated distributed-energy ecosystem is technically achievable and commercially viable.
The current gridlock is not inevitable and rooftop solar may be the catalyst to unlock it.
 
Yining Zou is a Research Associate at Agora Energy China, focusing on China’s energy and power sector transition.
Photo Credit: Photo of rooftop solar in rural China, courtesy of Yining Zou
Sources: Agora Energiewende, China Daily, China NEA, China’s Development Research Centre of the State Council, Global Energy Monitor, Wood Mackenzie, World Bank, UN
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