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Utility-scale solar project costs in India could increase by around 20% over the next six to eight months, according to ICRA, as developers face higher costs for domestically sourced solar cells and key raw materials. Domestic cells currently carry a premium of about INR 5–6 per watt over imported cells, while higher freight and supply-chain costs linked to the West Asia conflict are adding pressure. The Centre has extended a limited exemption from ALMM List-II requirements for solar cells to net-metering and open-access renewable projects until December 2026. More than 150 GW of renewable projects were under construction as of June 2026, adding to the importance of equipment and transmission availability.
Representative image
Utility-scale solar project costs in India could rise by around 20% over the next six to eight months as developers face higher domestic sourcing costs, elevated raw material prices and freight pressures linked to the West Asia conflict, according to ICRA. The increase comes as India continues to expand renewable capacity, with more than 150 GW of renewable energy projects under construction as of 30 June 2026.
A major source of cost pressure is the widening difference between imported and domestically manufactured solar cells. ICRA estimates that a module manufactured by a domestic original equipment manufacturer using imported cells costs around 16 US cents per watt, compared with about 22.5 US cents per watt when domestic cells are used. This represents a premium of roughly 6–7 US cents per watt, or around INR 5–6 per watt.
The pricing pressure is emerging as India increases requirements for domestic sourcing of solar equipment. The Ministry of New and Renewable Energy (MNRE) has maintained the Approved List of Models and Manufacturers (ALMM) List-II policy for solar photovoltaic cells, while providing a limited exemption for certain projects. Under the decision announced in July, net-metering and open-access renewable energy projects can be commissioned without ALMM List-II compliance for solar cells until 31 December 2026.
The Centre had previously allowed this exemption for the specified segment until 31 May 2026. MNRE said the extended window was intended to support standalone solar module manufacturers with existing inventories and provide additional time for projects to transition towards sourcing cells from manufacturers included in ALMM List-II. The ministry also said domestic solar PV manufacturing remains a key focus of its efforts to build self-reliance in the sector.
Domestic manufacturing capacity has expanded, although cell production remains considerably smaller than module capacity. ALMM-registered module manufacturing capacity increased to 215.5 GW in July 2026 from 173 GW in March, while domestic solar cell capacity stood at 31.8 GW. ICRA expects the resulting module overcapacity to contribute to consolidation, with vertically integrated manufacturers likely to have greater resilience.
The cost increase is also emerging alongside weaker renewable project award activity. Renewable capacity awards declined from 40.6 GW in FY25 to 14.7 GW in FY26, while only 4.7 GW had been awarded in FY27 up to 10 August. Unsigned power purchase agreement capacity remained at about 40–45 GW as of April 2026. ICRA said bidding has increasingly shifted towards firm, dispatchable and round-the-clock renewable power.
Grid constraints are another concern for project economics. ICRA estimates that about 37% of capacity at affected substations in the northern, western and southern regions is operating under temporary General Network Access, with curtailment of 30–50% during solar hours. Peak curtailment has reached 8,617 MW in the western region and 5,573 MW in the northern region.
Storage is consequently becoming more important for renewable integration. Battery energy storage system capacity that was operational, under construction or awarded stood at around 90 GWh as of June 2026. ICRA expects India’s renewable energy generation share, including large hydro, to exceed 35% by FY30, compared with 22% in FY25. Despite near-term cost and execution pressures, the ratings agency retains a stable outlook for the renewable sector.
Source- PIB
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