A prolonged decline in renewable energy tariffs may be approaching an inflection point as multiple cost pressures emerge simultaneously across the solar and battery energy storage system (BESS) value chains.

• Depreciation of the Indian rupee, rising commodity prices and the impending implementation of ALMM List-II are expected to result in increase project capital costs. These cost pressures may increase utility-scale project costs for the solar component by ~20-25% in the near term.
• Further, ICRA estimates that these factors could materially impact project economics, reducing debt service coverage cushions for recently awarded projects, necessitating an upward correction in solar and BESS tariffs to sustain project viability.
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