Higher Module Prices Raise Cost of Large-Scale, Rooftop Solar Systems in Q1 2021

The cost of raw materials used in solar projects continued to rise in Q1 2021, triggered by the impact of the second wave of COVID-19


The average cost of large-scale solar projects first quarter of 2021 (Q1 2021) was about ₹36.6 million (~$505,308)/MW, according to Mercom’s recently released Q1 2021 India Solar Market Update.

The cost increased by 5% when compared to the same period last year with about ₹35 million (~$483,121)/MW and a 4% rise from the previous quarter (Q4 2020) when the cost was about ₹35.3 million (~$488,255)/MW.

Q1 2021 Average Large-scale Solar Project Cost per MW

Large-scale solar project costs rose by 4% quarter-over-quarter (QoQ) due to rising module costs and raw material prices like steel, iron, aluminum, and copper. The cost of raw materials has continued to rise since Q1 2021, and the lack of availability has impacted the overall system cost. Freight charges are high all over the world, and the shortage of shipping containers is also widespread.

The average cost per MW for rooftop solar installations was around ₹38 million (~$524,445)/MW, up 3% from the same period last year when costs stood at ₹36.9 million (~$509,242)/MW. The average cost for setting up rooftop solar systems was ₹36.6 million (~$504,959)/MW in the previous quarter, up roughly 4% QoQ.

Q1 2021 Average Rooftop Solar System Cost in India per MW

Apart from the spike in the average selling price (ASPs) of modules, a surge in mounting structure costs also contributed to higher system costs. The increase in raw material costs, including steel and aluminum, has resulted in mounting structures prices going up significantly.

Even with the rise in cost, it makes perfect economic sense for industries to adopt rooftop solar as grid tariffs are at times up to 40% more expensive compared to rooftop solar.

According to the report, for the first time in five years, module prices have risen for four quarters in a row. Module prices are expected to remain high this year as component shortage, and logistical issues are expected to take 6-9 months to resolve.

The  Q1 2021 India Solar Market Update has identified a surge in demand for rooftop solar, especially from the industries that see solar as the best choice for reducing their operating expenses. The pandemic has prompted several industries to go solar. Although opportunities are flooding, installers face a dilemma as module procurement has been a difficult affair with soaring prices.

In Q1 2021, large-scale solar projects totaled 1,749 MW, up by 43% QoQ, and 307 MW were added in rooftop solar installations, an 8% growth from the last quarter.

Rahul is a staff reporter at Mercom India. Before entering the world of renewables, Rahul was head of the Gujarat bureau for The Quint. He has also worked for DNA Ahmedabad and Ahmedabad Mirror. Hailing from a banking and finance background, Rahul has also worked for JP Morgan Chase and State Bank of India. More articles from Rahul Nair.