Key Details
The International Renewable Energy Agency’s Addressing Renewable Energy Supply Chain Risks report links supply-chain resilience directly to the design of renewable energy auctions and the industrial policies supporting them.
Supply-Chain Risk | Policy or Auction Response |
|---|---|
Equipment or financing costs rise after bidding | Index contract prices to agreed cost or inflation benchmarks |
Shipping and manufacturing delays affect delivery | Allow realistic lead times and use graduated bonds and penalties |
Projects wait for land, permits or grid connections | Complete more preparatory work before auctions and pre-allocate grid capacity |
Critical equipment comes from concentrated sources | Diversify suppliers and trade routes; consider selective inventories or pooled reserves |
Domestic manufacturing is a policy objective | Use local-content or non-price criteria alongside stable demand, finance, skills and industrial support |
An exceptional shock threatens awarded projects | Reopen selected contract terms cautiously rather than lose the entire project |
India’s position illustrates both the progress and the remaining concentration:
India received only 1% of global investment in energy-transition manufacturing facilities during 2018–2024, compared with more than 80% for China.
India produced an estimated 4.5% of the world’s solar modules in 2024. Installed module-manufacturing capacity reached 68.2 GW, but production was about 34.2 GW, reflecting capacity utilisation of roughly 50%.
Indian wind-turbine manufacturers secured around 0.8% of global turbine orders in 2024.
Low Tariffs Can Leave Projects Exposed
Renewable auctions have lowered electricity prices through competitive long-term contracts, but low fixed bids can become difficult to deliver when equipment and financing costs rise before commissioning.
Between 2020 and 2022, higher polysilicon, metal and freight costs increased estimated investment costs for new utility-scale solar and wind projects by 15–25% globally. In India, the lowest solar tariff rose from ₹1.99/kWh in December 2020 to ₹2.35/kWh in February 2022 as imported input costs increased.
IRENA therefore argues that auction performance should be assessed not only by the winning tariff, but also by project realisation, delivery time and system cost.
Indexation Can Allocate Cost Risk in Advance
Contract indexation links project remuneration to agreed benchmarks such as inflation, commodity prices, interest rates or exchange rates. It can cover the entire tariff or only cost components particularly exposed to external shocks.
This allows developers to retain ordinary commercial risk while specified exceptional cost movements are shared with procurers or consumers. The trade-off is between greater project-delivery certainty and potentially higher tariffs or public costs.
Other mechanisms can reduce risk in different ways: longer lead times, graduated bonds and penalties, and pre-arranged land, permits and grid access. Contract reopening can rescue projects after exceptional shocks, but routine renegotiation can undermine auction credibility.
India’s solar-park model and partial grid reservation are cited as examples of reducing post-auction development uncertainty.
India’s ALMM Experience Shows the Localisation Trade-Off
IRENA uses India’s Approved List of Models and Manufacturers (ALMM) to examine how domestic-content requirements interact with renewable deployment.
During the 2022–23 implementation episode, no foreign manufacturers had been admitted to the list and approved annual module capacity stood at 21.7 GW by January 2023. Supply constraints and project delays contributed to a temporary suspension of the requirement.
This is historical rather than the current position. ALMM is now operational and has expanded to include a separate solar-cell list, first issued in July 2025 and subsequently updated.
Earlier Indian auction evidence shows the trade-off more clearly: the local-content segment attracted bids for around 700 MW, compared with 1,470 MW in the unrestricted segment, while one study estimated electricity costs about 6% higher. Completion rates were nevertheless broadly comparable, and evidence on longer-term manufacturing and innovation gains was mixed.
The issue is therefore not localisation itself, but whether its timing and scope match domestic productive capacity, technological competitiveness and the deployment pipeline.
Manufacturing Resilience Requires More Than Procurement Rules
Local-content rules can create demand but cannot by themselves build competitive manufacturing. IRENA links auction design with industrial strategy, trade, R&D, finance, mineral processing, skills and recycling.
Successful localisation generally requires a large and predictable project pipeline that gives manufacturers confidence to invest. In smaller or less mature markets, rigid requirements can instead reduce competition without creating an efficient domestic industry.
Resilience also need not mean producing every component domestically. Countries can combine selective domestic manufacturing with supplier diversification, regional production, multiple trade routes, recycling and strategic reserves.
Policy Relevance
For India, the challenge is to pursue rapid renewable deployment and deeper domestic manufacturing without making one undermine the other.
Allocate auction risks upfront: Contracts can specify which risks remain with developers and which exceptional movements qualify for indexation, reducing reliance on later renegotiation.
Measure localisation by outcomes, not factory capacity alone: Capacity utilisation, upstream dependence, bidder participation, tariffs and project commissioning can show whether ALMM requirements are strengthening resilience without constraining deployment.
Move deeper into the value chain: The industrial opportunity extends beyond module assembly to cells, wafers, inverters, equipment, storage components, critical minerals and recycling.
Coordinate procurement with industrial policy: Alignment among MNRE, the Ministry of Power, SECI and industrial-policy institutions will determine whether renewable demand translates into competitive domestic capability.
Follow the Full Report Here: IRENA: Addressing Renewable Energy Supply Chain Risks—Auction Design and Policy Frameworks