Whalesbook
Regulatory Shift Forces Domestic Solar Cells
The Ministry of New and Renewable Energy has decided against extending the Approved List of Models and Manufacturers (ALMM) List-II deadline. This means all government-backed, net-metering, and open-access solar projects must now use only solar cells made in India. The government may offer limited exceptions for projects with substantial prior investment, such as land acquisition or installed equipment, but the core policy aims to build India's solar manufacturing sector.
Supply Chain Gap for Domestic Makers
This policy is a major boost for Indian solar cell producers like Premier Energies and Waaree Energies. However, domestic capacity, around 27 GW by early 2026, may not meet the country's large solar energy goals. New factories take time to reach full, stable production. This limited capacity means developers will compete for approved domestic components, giving manufacturers more pricing power.
Developer Costs and Project Risks Rise
Project developers, including NTPC Green Energy, JSW Energy, and KPI Green Energy, face significant execution challenges. Many had planned projects assuming lower costs for imported cells. Switching to Indian cells could increase total project expenses by 3% to 5%, reducing profits on fixed-price contracts. Delays in securing compliant supplies also risk penalties and affect the viability of power purchase agreements.
Concerns Over Cost and Efficiency
The drive for domestic production raises several concerns. Using more expensive Indian cells could slow down new solar capacity growth. If domestic manufacturers cannot increase output to meet demand by the June deadline, project delays could ripple through the sector. Restricting technology choices to the domestic list might also force developers to use less efficient or more expensive modules than those available globally, potentially impacting India's target of 500 GW of non-fossil energy capacity.
Market Reaction and Outlook
Investors are evaluating which companies will benefit and which will struggle. Manufacturers face the challenge of scaling up production quickly enough to meet demand. Developers with strong finances to absorb higher costs and those who have secured diverse supply chains for compliant domestic equipment are likely to be favored.