India’s renewable energy sector is entering a new phase, one defined not by capacity targets alone but by a growing emphasis on domestic value creation. Among the many policy levers under discussion, the one slowly gaining traction is the extension of Domestic Content Requirement (DCR) norms beyond government or PSU-linked programs; potentially reaching private, captive industrial solar projects in the near future.
This shift is not loud or headline-grabbing yet. But the early signals are too consistent to ignore.
For industries planning solar adoption, the next 24–36 months may reshape CapEx planning, procurement strategies and long-term energy economics in a meaningful way.
This blog breaks down what’s happening, why it matters and how businesses should prepare.
Why DCR Is Back in Conversation and Why It Matters Now
For years, DCR modules were largely confined to government schemes such as KUSUM, specific rooftop programs and certain public-sector solar procurement.
Private industries, especially those setting up captive or group-captive solar plants, were free to use non-DCR modules imported from global suppliers.
However, three developments have shifted the landscape:
1. MNRE’s tightening stance on traceability and domestic sourcing
o The ministry has been emphasising module origin, quality verification, and the need for resilient supply chains; especially after the global disruptions of 2021–23.
2. State-level signals (Gujarat’s DREBP being a key example)
o Gujarat’s recent communication on distributed renewable energy projects introduced discussions around domestic sourcing expectations even for private-sector projects. While not a blanket mandate, it indicates a direction of travel.
3. The 2026 cell localisation requirement
o From 2026, India expects a deeper level of domestic manufacturing, including cells and potentially wafer-level capacity. DCR becomes a natural extension of this goal.
These signals collectively suggest that DCR may gradually find its way into captive and industrial solar, not immediately or universally, but progressively.
How This Change Could Affect Industrial Solar Economics
Industries evaluating captive solar today typically compare DCR vs non-DCR based on upfront capex difference and resultant payback.
o Cost Impact: The ₹1 Crore/MW Question
o Today, DCR modules generally cost ₹1 crore/MW more than non-DCR alternatives.
o This varies slightly by supplier, wattage class, technology (mono PERC vs TOPCon), and scale.
o Payback Extension: A Manageable 8–12 Months
o For most industries, a 1 MW captive solar project offers a payback of about 3.5–4.5 years depending on tariff, CUF and financing structure.
o Switching to DCR pushes this by 8–12 months, not enough to fundamentally alter viability.
o Why LCOE Still Works in Favour of Captive Solar
o Despite higher capex, the Levelized Cost of Energy (LCOE) remains firmly below industrial grid tariffs because:
- Industrial tariffs have increased steadily over the last 5–7 years
- Captive solar offsets power at the landed tariff, not base tariff
- DCR doesn’t change generation significantly (CUF remains comparable)
- Operating costs are predictable and inflation-resistant
This is why even companies that installed solar earlier at ₹6–6.5 crore/MW (2017–18) are now enjoying some of the lowest energy costs in their sectors.
The math hasn’t changed — only the timeline has.
The Tariff–Capex Reality: A Diverging Trend
One of the strongest arguments in favour of captive solar is the widening gap between grid tariffs and solar LCOE.
1. Grid Tariffs: A Structural Upward Curve
In states like Gujarat, industrial tariffs have risen consistently due to:
- Higher power procurement costs
- Costs of balancing renewable energy
- DISCOM losses and recovery requirements
- Cross-subsidy burdens
- Transmission & wheeling adjustments
Industries today are not just paying for energy; they are paying for system-wide inefficiencies.
2. Solar Capex: A Long-Term Decline With a Temporary Pause
Solar capex has fallen dramatically:
|
Year |
Typical 1MW Project Capex |
|
2017 |
₹6.5–6.8 crore/MW |
|
2019 |
₹5.0–5.3 crore/MW |
|
2021 |
₹4.0–4.4 crore/MW |
|
2023–24 |
₹3.4–3.7 crore/MW |
The small rise seen recently is due to BCD, global price fluctuations and increased domestic cell prices. But the structural decline trend remains intact as local manufacturing scales.
This divergence — rising grid costs vs stabilising solar costs — ensures captive solar remains attractive even under a DCR regime.
Why the Government Is Pushing DCR: The Strategic View
DCR is not just about protecting local manufacturers.
It’s about building a resilient energy ecosystem.
1. Reducing import dependence
India’s solar manufacturing is still heavily reliant on imported cells & wafers. Every disruption translates into delays and cost volatility.
2. Strengthening quality and reliability
Domestic modules allow better traceability, on-ground warranty support and manufacturing accountability.
3. Creating long-term energy security
As industries shift to renewables for competitiveness, the government wants to ensure that a large part of this ecosystem is localised.
4. Building economic value within India
Each MW manufactured domestically contributes to jobs, tax revenue, supply-chain depth and technological self-reliance.
These long-term objectives explain why DCR is likely here to stay and expand.
What Industries Should Do: A Strategic Roadmap for FY26–27
If your business is planning solar adoption in the next 24–36 months, this is not the time to pause.
It’s the time to plan smartly.
1. Revisit Capex and LCOE Assumptions
Model both scenarios:
- DCR-compliant
- Non-DCR (current)
This helps in presenting neutral, transparent data to management.
2. Pre-align procurement strategies
If you expect DCR to be mandated, the timing of module purchase becomes crucial.
3. Update internal approvals and board presentations
Boards today want clarity on:
- Tariff outlook
- LCOE comparison
- Policy direction
- long-term ROI stability
A structured narrative helps decisions happen faster.
4. Integrate EMS and battery-readiness
With CUF improvements and peak-hour pricing expected in many states, the combination of solar + EMS + storage will matter more than standalone solar.
5. Treat solar as a competitiveness asset, not a procurement item
Energy cost stability is now directly linked to pricing power, profitability and market competitiveness.
Final Takeaway
A broader DCR mandate, if introduced, will raise capex in the short term. But it does not dilute the core value proposition of captive solar.
The LCOE advantage remains intact. The payback remains attractive. The long-term economics stay stable and predictable.
For industries, the more important question is no longer “Will tariffs rise?”
They already have.
The question is:
“Do we secure our energy costs now, or wait until policy changes force us to?”
Those who plan early will enter the next energy cycle with a clear advantage.
