Mumbai, Aug. 26 -- The cost of setting up solar projects in India is set to rise by 20 per cent over the next six to eight months as domestic cell premiums, higher input and freight costs and supply-chain disruption linked to West Asia squeeze strain project economics. The increase comes while over 150 GW of renewable projects were under construction as of 30 June 2026, raising the importance of timely execution. Rating agency Icra has said renewables including large hydro could supply more than 35 per cent of generation by FY30.
Icra cited a material price gap between domestic and imported cells, estimating modules using imported cells at around 16 cents per watt versus 22.5 cents per watt for domestic cells, a premium of six to seven cents. It noted registered module capacity growth while domestic cell capacity remained limited at about 31.8 GW, and warned module overcapacity could prompt consolidation that favours vertically integrated manufacturers.
Market activity has moderated, with renewable capacity awards falling markedly and unsigned power purchase agreement capacity remaining large at roughly 40 to 45 GW as of April 2026. Bidding has shifted towards firm, dispatchable and round the clock supply, and a demand-based tender discovered a tariff of Rs 5.25 per unit, below many new thermal plants at above Rs 6 per unit.
Grid constraints and curtailment, running at 30 to 50 per cent at some substations and with peak impacts in the western and northern regions, add to the challenge. Storage is increasingly central, with BESS at about 90 GWh across awarded, under construction and operational stages, and levelised costs for two to four hour systems estimated at Rs 4 to Rs 7 per unit versus about Rs 5 for pumped storage. At battery equipment costs near $70 to $75 per kWh, BESS capital costs are estimated at $110 to $130 per kWh, and some projects have cumulative debt-service coverage ratios of zero point eight to one point two times. Icra retained a Stable outlook but flagged risks from PPA delays, equipment costs, transmission availability and execution.
Published by HT Digital Content Services with permission from Construction World.