India Solar Costs Surge Amid Supply Chain Shocks

Solar module prices have escalated by about a third since late December, primarily due to surging silver and aluminum costs, a weaker rupee, and global component shortages. China's reduced wafer quotas and a value-added tax refund rollback have intensified the scramble for components, driving up photovoltaic cell prices significantly. This price hike directly impacts India's extensive solar pipeline, with 93 GW of capacity currently under construction.

This surge in equipment costs is expected to raise capital expenses for new projects and likely increase tariffs for future power purchase agreements. The situation is compounded by the fact that 43 GW of green power projects, representing a ₹2.1 trillion investment, remain without long-term supply contracts. Power distribution companies are already selling renewable energy at a loss on exchanges due to oversupply during solar hours.

Domestic manufacturers, heavily reliant on imported cells and silver, have had to raise module prices, impacting project profitability and internal rates of return. While India possesses substantial module manufacturing capacity, cell production remains limited, underscoring a structural vulnerability in the supply chain. Experts suggest that terms in power purchase agreements need to account for such price volatility to ensure stability.