Consumers planning to install rooftop solar systems in India may face higher upfront costs following a significant policy shift. Effective June 1, new government regulations now mandate the exclusive use of domestically manufactured solar cells for projects connected through net-metering and open-access arrangements.
This move, aimed at strengthening India's solar manufacturing ecosystem and reducing reliance on imports, particularly from China, is projected to increase installation costs by around ₹15,000 for a standard 5-kilowatt (kW) residential system.
Understanding the New Mandate
Previously, India had required the use of locally manufactured solar modules. The latest directive extends this localization to the solar cells themselves, which are the fundamental components within these panels. Under the Approved List of Models and Manufacturers (ALMM) List-II framework, developers must now source solar cells only from approved domestic manufacturers.
This rule impacts all new rooftop solar installations, including those under the government's flagship PM Surya Ghar: Muft Bijli Yojana, as well as open-access projects utilized by commercial and industrial consumers. Despite calls from some developers for an extension, the government proceeded with the transition on schedule.
The Impact on Rooftop Solar Costs
Industry estimates suggest that rooftop solar installations could become approximately ₹3,000 more expensive per kilowatt due to the higher cost of domestically produced cells compared to imported alternatives. For a typical 5-kW residential system, this translates to an additional expense of roughly ₹15,000.
While consumers under the PM Surya Ghar scheme will continue to receive government subsidies, industry observers anticipate stricter compliance requirements and documentation checks. The long-term goal is to encourage investments in domestic cell manufacturing, enhance energy security, and foster a more self-reliant clean energy sector.
Supply Constraints and Industry Concerns
A significant challenge highlighted by the industry is the disparity between domestic manufacturing capacity and demand. India's annual solar cell demand is estimated at around 50 GW, while domestic production capacity stands considerably lower, at 25-30 GW. Historically, over 90% of India's solar cell requirements have been met through imports.
Smaller solar module manufacturers are particularly concerned, as many do not produce their own cells and will now depend on larger integrated manufacturers for supplies. This situation could lead to supply bottlenecks and potentially increase the pricing power of domestic cell producers.
Why Domestic Cells Cost More
Experts explain that solar cell manufacturing is highly capital-intensive, requiring substantial investments—around ₹500 crore per gigawatt—and a long gestation period of 18–24 months to establish facilities. With technology evolving rapidly, manufacturers need to recover these investments quickly, contributing to elevated costs.
Currently, imported cells are available for approximately ₹5 per watt-peak (Wp), whereas Indian-made cells cost between ₹12–14 per Wp. This price difference is attributed to limited domestic capacity and existing supply constraints. However, several new cell manufacturing facilities are under development, and increased competition is expected to gradually reduce costs in the coming years.
The Road Ahead for India's Solar Industry
While the new sourcing mandate may introduce higher prices and temporary supply chain disruptions, proponents argue that it provides the necessary policy certainty to attract billions of rupees in fresh manufacturing investments. Over time, increased domestic production capacity and greater competition are anticipated to drive down costs, ultimately fostering a stronger, more self-sufficient, and globally competitive solar industry for India.