5 Reasons Solar Customers Await 2025 With Some Trepidation

The 5 risks to solar prices in 2025 for customers

2024 is set to go down as the best year on record for solar in India, with total capacity additions set to cross a record 22 GW during the year. For the financial year (April to March) as well, capacity additions could be even higher, possibly touching 24 GW or more. But behind the record numbers is a sobering indicator of the challenges ahead for solar consumers. The risk of higher prices for modules, the largest cost component in solar projects, besides the massive expectation of at least 30 GW of capacity additions in 2025 to meet its 2030 targets. So what are these factors putting prices at risk? Keep in mind that low prices in China for cells and wafers have been a key reason behind the price downtrend in early 2024, and then, the steady yet low levels that enabled India-based manufacturers to benefit and continue to sell at viable rates for developers. Despite a premium that was as high as 100% in case of DCR modules.

1. China’s Integrated solar manufacturers are hurting from losses, and trying to find a way out by ‘cooperating’. Even as Chinese wind energy equipment manufacturers have banded together to clamp down on sub optimal pricing to protect their balance sheets, its solar manufacturers have not really been able to do that, yet. However, with the Chinese government taking a hand off approach for now, possibly to avoid any further accusations from key trading partners of Industry protection, don’t be surprised if Chinese prices start inching up. This could be driven by the closure of weaker firms in China, selective shutdowns of large facilities for maintainance by the big 5-6 players, or simply shut down of capacities for ‘older’ options like MonoPerc vis a vis TOPCON, HJT or now, IBC modules. The simple fact is that it looks highly unlikely that the top manufacturers will endure another year of bleeding on their books.  Keep in mind that the current tariff rate of 40% on modules has shut out China from the market for all purposes on new projects, and the 25% duty on cell imports is also restricted to the few segments where non-DCR modules are allowed.
2. Reduction of Export Incentives In China– In what was a surprisingly contrarian move, the Chinese government seemed to make a bad situation worse by reducing the export incentive available on many products, including solar by almost 30% last month. That is estimated to add a cost of 2-2.5 cents per watt on Chinese exports soon. Besides that, the Chinese government is also pushing for higher CUF norms and technology standards in the sector, a subtle push to weed out weaker firms and back the global leaders from the country to stay strong or grow bigger.
3. Duty on Solar Glass: The imposition of anti-dumping duty on solar glass imports from China and some South East Asian countries by India also means higher costs for module makers here. This has already been reported on by SaurEnergy on Dec 5.
4. DCR cell Mandate: India’s DCR cell mandate for almost all key solar projects is also starting to bite, as cell manufacturing creeps up much more slowly than expected here. That has meant a much higher price for DCR modules than imported ones, even after accounting for duties. For now, even as almost 8 GW of cell making capacities are added during this financial year, the shortage seems unlikely to go away until well into 2026, and then too, at a higher price. Cell making is a much more complex process than module assembly, and most manufacturers have struggled to stabilise processes that will ensure consistent quality. With ISTS exemption on projects set to start ending from June’2025, order books are already full for those that can deliver, well into 2025. For these domestic cell makers, any uptick in wafer imports from China will be passed on, as most donot keep inventories beyond a month or two. Industry experts who expect wafer prices 5-10% higher than present levels by June next year are finding a voice.
5. Rising Copper prices: Copper prices, with the critical role the metal plays in panels as well as the wiring involved in projects, have always been watched keenly. While prices have risen by under 7% in 2024 so far, talk is of a much sharper rise in 2025 due to rising demand from EVs and other sectors. If that does happen as it looks likely, solar manufacturers and developers will also feel the pinch, especially as India remains net importer of copper now.

Conclusion: With every 10% rise in module costs likely to lead to upto 20 paise rise in cost per kW on large tenders, industry people we have spoken to in the past few months believe that the Indian market can carry a maximum 10-15% rise in costs from present levels, before resistance starts building. With massive consumer subsidy schemes like PM SuryaGhar and PMKUSUM also hitting their straps now, that ensures a strong demand even in a price sensitive market. Even corporate buyers, expected to add over 2.5 GW of solar in 2025, are relatively more elastic in their demand for solar power. The challenge will lie with utility scale solar, accounting for a lions share of capacity additions in 2025 as well. Here, it has been demonstrated that state discoms are reluctant to pick up solar power now at prices north of Rs 2.80 even. The saving grace? Some of the rise in solar costs if at all might be masked by the sharp drop in storage costs, considering the increasing share of storage linked tenders. However, looking beyond all this, a sharper rise in costs will certainly lead to many questions being asked of domestic manufacturers by all stakeholders, including the government, which has provided massive backing in the form of tariff protection, non tariff barriers (ALMM), and even PLI schemes to see a strong domestic manufacturing base that is globally competitive.

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