The average cost of large-scale solar projects in the first quarter (Q1) of the calendar year (CY) 2023 decreased by 5% quarter-over-quarter (QoQ) for the first time in 11 quarters due to a drop in module prices.

The findings were published in Mercom India Research’s recently released Q1 2023 India Solar Market Quarterly Update.

Project costs are expected to continue downward if module prices keep declining as manufacturers expand production capacity. Approximately 50-60% of the total project cost is attributed to solar modules.

With the government announcing the suspension of the Approved List of Models and Manufacturers (ALMM) regulation until March 2024, developers now have access to imported modules.

India imported solar cells and modules worth $812 million (~₹ 66.7 billion) in Q1 2023, a QoQ increase of 91% compared to $425 million (~₹34.9 billion).

Over the past two years, large-scale solar projects in India have faced consistent challenges due to COVID-induced lockdowns, supply chain disruptions, and fluctuating prices of components. However, there are signs of stabilization in the market as of Q1 2023, and many of these impediments have diminished.

After an eight-quarter increase starting Q3 2020 and until the Basic Customs Duty (BCD) implementation in Q2 2022, mono PERC and polycrystalline module prices have declined for three quarters beginning Q3 2022.

While declining module costs have helped bring the project costs down, other project components have seen cost increases in the quarter from January to March.

Inverter costs increased 11.5% QoQ as manufacturers struggled to meet the supply demands due to the limited availability of Insulated Gate Bipolar Transistors (IGBT) and other semiconductors, which are crucial components for inverter manufacturing.

The supply shortage presents a significant challenge, leading to longer procurement periods and increased costs. Though inverters are critical for any solar project, they account for only 5% of the total project cost.

The increase in steel and aluminum prices resulted in an approximately 30% QoQ rise in the cost of module mounting structures. These structures constituted about 7% of the total project cost.

During Q1 2023, India witnessed installations decline of 48% YoY, with 1.9 GW in new solar capacity. Out of this, utility-scale installations accounted for approximately 1.4 GW, a decrease of 56% compared to the previous year and a 37% decline compared with the last quarter. India’s cumulative installed solar capacity now stands at 64.5 GW.

Mercom’s Q1 2023 India Solar Market Quarterly Update covers all facets of the Indian solar market and a detailed analysis of the project cost trends. For the complete report, visit: https://www.mercomindia.com/product/q1-2023-india-solar-market-update.