The rising costs of solar panels and components like glass, wafers and silicones, which are mostly imported from China, have forced contractors to hold up more than 3,000 MW of ground-mounted and over 300 MW of rooftop projects, eventually leading to renegotiation of contracts.
Solar module prices have been trending high since mid-2020 and have risen around 17% year-to-date. At the beginning of the year, module prices hovered around Rs 18 per watt peak, and companies that bid aggressively expecting prices to fall are finding it difficult to keep their projects viable.
Puneet Goyal, director and co-founder of SunAlpha Energy, told Financial Express that more than 300 MW of rooftop projects have been held up due to the rising price of panels. “The indecisiveness on when and where to purchase the panels has delayed the projects. The cap on net metering by various states — albeit increased by central government to 500 kWh — has dented developers’ capacity expansion plans in the rooftop segment,” Goyal said.
While the rising global commodity prices of steel, copper and aluminium have contributed to the overall price pressure, experts said suppliers have already factored in the basic customs duty in the solar panel prices. For a competitive market like India, where independent power producers play on lower margins and modules represent 60% of the project cost, even a modest increase in module price will make projects unsustainable.
Increasing cost of solar panels and components destroys the incentive of investors, consumers and the installers. An increase in input cost by one rupee impacts PPA tariff or production cost by about 10 paise per unit.
Solar energy observers say that more than 3,000 MW projects in the ground-mounted segment have been held up, as the impact is much severe on this segment compared to rooftop. The rooftop segment is believed to have partially benefited from the government notification increasing the net metering cap to 500kWh. However, power being a state subject, it is not mandatory for states to follow the notification. However, the recently announced PLI scheme is expected to increase the availability of solar panels in India, which will stabilise the project cost going ahead.