Solar Module Price Spike Puts India's Renewable Goals at Risk
India's solar power developers face a fresh challenge. A sharp increase in solar module prices threatens to raise costs and tariffs for projects currently under construction. This comes at a time when many solar projects already struggle without power purchase contracts.
Price Surge Driven by Multiple Factors
Solar module prices have risen by approximately one-third since late December. Several factors contribute to this sudden increase. Record rallies in silver and aluminium prices play a significant role. A weaker rupee against other currencies adds to the pressure. Global supply chain disruptions following China's policy changes create additional complications.
China recently tightened wafer quotas and signaled a rollback of a 9% value-added tax refund. This policy shift triggered a scramble among global buyers to secure supplies before deadlines. The resulting demand spike pushed prices even higher.
The price of photovoltaic cells has jumped dramatically. These cells form the core of solar panels. Industry sources report prices rising from 3.5 cents per watt peak to 5.5 cents in just weeks. Most of these cells come from imports, highlighting India's supply chain vulnerability.
Impact on Projects and Developers
Prashant Mathur, CEO of Saatvik Green Energy Ltd, explains the implications. "The recent jump in cell prices highlights the structural vulnerability of India's solar supply chain," he says. "As equipment costs rise, upcoming projects will face higher capital costs. Tariffs for new power purchase agreements are likely to harden after a prolonged period of deflation."
Currently, around 93 gigawatts of solar power capacity remains under construction. The sector already accounts for 135.81 gigawatts of installed capacity. India aims for 300 gigawatts of solar energy within its overall 500 gigawatt non-fossil fuel capacity target by 2030.
The price increase creates particular problems for projects with fixed tariffs. Solar sector rules generally don't allow power producers to recover additional costs from component price hikes. Mohit Bhargava, country director at UC Berkeley's India Energy & Climate Center, clarifies this limitation. "There is no provision in power purchase agreements to revise tariffs or allow compensation if component prices increase due to external factors," he states.
Manufacturers Feel the Pressure Too
Domestic module manufacturers face their own challenges. Most still rely heavily on imported cells and silver. One executive from a major component manufacturer describes the situation anonymously. "Domestic module manufacturers have raised module prices by as much as ₹20 lakh per megawatt from ₹2-3 crore per megawatt," the executive reveals.
This development affects not only project costs but also manufacturer profitability. Most components for modules assembled in India come from China. This dependence impacts the internal rate of return for Indian solar module makers.
India possesses substantial manufacturing capacity. The country has more than 100 gigawatts of solar module manufacturing capability. Major players include Adani Solar, ACME Solar, Avaada Electro, ReNew, Waaree Energies and Saatvik Solar. According to Wood Mackenzie, this capacity should surpass 125 gigawatts by 2025.
However, cell production remains limited at just 18 gigawatts. Critical subcomponents like polysilicon, ingots, and wafers all come through imports. Top Chinese suppliers Longi, Jinko Solar and Trina Solar dominate this market.
Policy Challenges and Industry Outlook
Government policies add another layer of complexity. Indian solar power developers must source components from an Approved List of Models and Manufacturers for government-supported schemes. A similar mandate for cells takes effect from June this year. Wafers may come under such a scheme by 2028 to boost local manufacturing.
A former secretary in the ministry of new and renewable energy suggests contract flexibility. "There should be terms and conditions that account for factors driving price volatility," the former official says. "Power purchase agreements should allow revision under such circumstances."
Ashish Agarwal of BluPine Energy offers a cautiously optimistic view. "Recent movements in module prices reflect evolving upstream dynamics," he observes. "This is a familiar, short-term pattern in global supply chains. Prices should return to previous levels as production normalizes."
However, Agarwal acknowledges potential risks. "If elevated prices persist, this would directly impact project costs and returns for developers. Prolonged price pressure could slow project execution and lead to softer demand across the renewable sector."
The situation underscores India's renewable energy challenges. Developers balance ambitious capacity targets against supply chain vulnerabilities and policy uncertainties. How the industry navigates these competing pressures will shape India's clean energy transition in coming years.
