Solar energy development and its role in the sustainable development of SMEs in energy constrained regions of India

Over the last decade, the development of small and medium enterprises (SMEs) in India has become more challenging due to frequent power outages and rising energy demand. Due to unpredictable power outages, many SMEs struggle to operate efficiently, while some are forced to reduce operations or shut down entirely. Solar power has become a potential solution to sustainable development as the traditional power grid is volatile. This paper explores how the availability of solar energy, solar energy generation, system efficiency and effectiveness and utilization affects the sustainable growth of SMEs in five eastern Indian states; Bihar, Jharkhand, Odisha, Assam and West Bengal is explored in this paper empirically. Primary data were collected using a structured questionnaire among 400 SME owners and managers. The analysis was performed using Partial Least Squares Structural Equation Modeling (PLS-SEM). Thus, the findings show that solar energy generation (β = 0.157), system efficiency and effectiveness (β = 0.202), and utilization (β = 0.347) have a positive effect on SME sustainability. The combination of these factors explains 75.2% of the variance in SME sustainable development (R2 = 0.752). The research suggests that the development of solar energy is a complex, stepwise process, rather than a mere adoption decision. From a policy perspective, the findings highlight the need for SME-oriented financing mechanisms, region-based solar energy projects, and improved grid integration policies to support the development of localized renewable energy in regions with limited energy resources.