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Solar Panel Cost: Installing solar panels is set to become more expensive! ICRA says solar panel costs: Setting up large-scale solar projects in the country could become costlier in the coming months. Rating agency ICRA projects that costs could rise by approximately 20% over the next 6 to 8 months. A primary reason for this is the shift from Chinese to domestic solar cells. Additionally, tensions in West Asia have driven up the prices of metals such as copper and aluminum.

According to ICRA, new government regulations require developers to purchase domestic solar cells, which are significantly more expensive than imported ones. This directly impacts the cost of modules and the overall project.

Why are domestic solar cells driving up costs?

ICRA states that domestic solar cells cost 6–7 cents per watt (approximately ₹5–6 per watt) more than imported cells.

Girishkumar Kadam, Senior Vice President at the agency, notes that the landed cost of modules made with domestic cells is around 22.5 cents per watt (approx. ₹19), whereas modules using imported cells cost about 16 cents per watt (approx. ₹13.5). He adds that this shift will account for the largest share of the cost increase expected in the coming months.

What is the impact of the new government rule?

The government has implemented a new rule effective June 1, 2026. Under this mandate, solar projects must exclusively use domestic solar cells from companies listed in the ALMM (Approved List of Models and Manufacturers).

However, certain 'open access' and 'net metering' projects have been granted a reprieve until December 31, 2026.

Impact of the West Asia situation

ICRA notes that domestic cells are not the only factor; ongoing tensions in West Asia have disrupted supply chains. Consequently, prices for copper and aluminum remain high, which could further increase the total cost of projects.

Confidence in the sector remains intact

Despite rising costs, ICRA has maintained a 'Stable' outlook for the renewable energy sector. The agency estimates that the share of renewable energy—including large hydro—in India's power generation could rise from 22% in 2024-25 to over 35% by 2029-30. As of June 30, 2026, renewable energy projects with a capacity exceeding 150 GW were under construction in the country.

Challenges Persist

ICRA notes that issues such as land acquisition, transmission network constraints, delays in signing Power Purchase Agreements (PPAs) and Power Sale Agreements (PSAs), high equipment costs, and supply chain disruptions continue to persist. The financial health of power distribution companies also remains a major challenge for the sector.

Despite this, the renewable energy sector saw 72 rating upgrades and 21 downgrades in FY26. Meanwhile, the first quarter of FY27 recorded four upgrades and no downgrades.ts could rise by up to 20%..

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