India’s solar power developers are saddled with unsold capacity. Now they face another risk

Subscribe to enjoy similar stories. NEW DELHI : A spike in prices of solar modules is expected to raise costs and tariffs for projects under construction, even as multiple solar projects languish for want of power purchase contracts. Solar module prices have surged by roughly a third since late December, thanks to soaring prices of silver and aluminium, a weaker rupee, and a global scramble for components after China tightened wafer quotas and signalled a rollback of a 9% value-added tax refund.

The price of photovoltaic cells—the core of the solar panel—has jumped to 5.5 cents per watt peak from 3.5 cents in just weeks, four people aware of the matter said. A module comprises multiple cells, which are largely imported. “The recent jump in cell prices highlights the structural vulnerability of India’s solar supply chain," said Prashant Mathur, chief executive officer at Saatvik Green Energy Ltd, a Gurugram-based solar component manufacturer.

“As equipment costs rise, upcoming projects will face higher capital costs, and tariffs for new power purchase agreements (PPAs) are likely to harden after a prolonged period of deflation." A total of around 93 gigawatts (GW) of solar power capacity is under construction, and the segment accounts for an installed capacity of 135.81GW. India targets 300GW of solar energy in its overall 500GW non-fossil fuel capacity by 2030. The risk of higher solar tariffs is another concern for India’s renewable energy sector, as multiple states prefer long-term purchase pacts for stable coal-fired power.