India's solar EPC (Engineering, Procurement, and Construction) sector is witnessing rapid growth as the country advances toward its renewable energy goals. Installed solar capacity has increased from under 10 GW in 2016 to more than 100 GW in 2025, reflecting strong industry momentum. With India targeting 500 GW of non-fossil fuel capacity by 2030, the sector is expected to continue expanding significantly in the coming years.
In this exclusive conversation with StartupTalky, Shobit Rai, Co-founder and Managing Director of Prozeal Green, discusses the key challenges and opportunities shaping the industry, including grid connectivity delays, transmission bottlenecks, EPC margins, workforce development, and the future of solar project execution in India.
Grid Connectivity Delays Have Become the Most Expensive Hidden Cost for Solar Developers
StartupTalky: India's solar EPC sector has grown dramatically, but is also known for project delays, land acquisition challenges, and grid connectivity backlogs. From your experience executing projects on the ground, which of these bottlenecks has the highest hidden cost for developers, and what systemic fix would make the biggest difference?
Shobit Rai: Grid connectivity backlogs. Not land, land gets the headlines because it’s political and visible. Grid delays are silent and devastating.
Here's the reality: I've seen projects that were 100% mechanically complete sit idle for 8-10 months waiting for ISTS connectivity or a pooling substation. During that entire period, debt keeps accumulating. On an INR 350 crore project, a seven-month commissioning delay costs INR 9-13 crore in interest alone, before you count demobilization losses, standing O&M costs, and team displacement.
The systemic fix is straightforward but politically uncomfortable: grid infrastructure must be tendered and awarded 24 months ahead of the solar capacity it’s meant to serve, with hard milestones and penalties for delays, the same penalties developers and EPCs face. Right now, all the grid readiness risk sits entirely on the private side. That’s structurally wrong. One policy correction here unlocks probably 15-20 GW of stranded or delayed capacity almost immediately.
Geopolitical Energy Shocks Are Increasing Logistics and Financing Costs
StartupTalky: The Iran conflict has sharply increased the cost of fuel logistics and project financing across the infrastructure sector. How has this geopolitical energy shock affected the cost and timeline of solar EPC projects in India, and how are developers and EPCs adjusting?
Shobit Rai: The impact is indirect but very real, primarily through shipping costs and raw materials like copper and aluminium, which are at a life high. Fuel cost has increased, which has increased which has impacted the cost of basic goods and freight by 10-15%.
A significant share of India's module imports and BoS components transit routes are disrupted by Red Sea instability. Freight costs spiked sharply through 2023-2024. On a 100 MW project, that translates to INR 1.5-2.5 crore in additional logistics cost compared to 2022 baselines, plus 3-6 weeks of port delays that throw construction sequencing off badly.
On financing, geopolitical risk-off sentiment pushes up the cost of dollar-denominated borrowing and ECB exposure. We've seen effective project IRRs compress by 80-120 basis points purely from financing cost movement, with no change in underlying project fundamentals.
Our response has been twofold. We've moved from just-in-time procurement to carrying 60-90 days of critical component inventory. And we've leaned harder into domestic module sourcing. There’s still a marginal price premium domestically, but supply chain predictability has real economic value when global logistics are volatile.
Why Solar EPC Margins Will Depend on Consolidation, O&M, and Specialization
StartupTalky: Module prices dropped significantly through 2023-2024, which was good for project viability but also intensified margin pressure on EPCs. How do you see the economics of the solar EPC business evolving over the next three years as the market matures?
Shobit Rai: Module prices fell 40-50% between 2022 and 2024. For developers, wonderful. For EPCs on fixed-price contracts bid at earlier assumptions, the benefits were passed to off-takers through lower tariffs, not retained as improved margins. Compression is real and not over.
Three things will define EPC economics going forward. First, consolidation, smaller EPCs without procurement scale or balance sheet strength will exit. The survivors will have genuine operational discipline, not just a willingness to bid low. Second, O&M and asset management will become the real margin pool. A 25-year solar asset generates most of its value in operation, not construction. EPCs that offer integrated O&M with meaningful performance guarantees will capture far more project lifetime value. Third, specialization wins: agri-solar, floating solar, hybrid RE-plus-storage, large-scale rooftop. The commodity utility-scale EPC model is a race to the bottom. Depth in specific segments commands better margins.
Our own internal target is 30-35% of revenues from recurring O&M within three years. That’s where the business needs to go.
Transmission Infrastructure Is Becoming a Critical Project Risk
StartupTalky: India's renewable energy pipeline now stretches to hundreds of gigawatts of committed capacity. But transmission infrastructure is not growing at the same pace. How does grid evacuation capacity become an EPC concern, and what happens to a project when the grid is simply not ready?
Shobit Rai: Grid capacity is growing at roughly 8-10% annually. Solar addition targets imply 20-25% annual capacity growth. That gap is structural and widening.
In Rajasthan, Gujarat, and parts of Andhra Pradesh, there are already pockets where committed solar generation simply cannot be absorbed without curtailment. When curtailment hits 15-25%, your actual energy yield collapses relative to projections, your debt service coverage ratio deteriorates, and your lender starts asking questions your PPA can’t fully answer.
From an EPC standpoint, we now conduct grid readiness verification before committing to any construction timeline. It causes friction with developers wanting fast mobilization, but we'd rather have that uncomfortable conversation upfront than absorb cost overruns when a pooling substation gets delayed nine months post-completion.
Distributed Solar Requires a Completely Different Execution Model
StartupTalky: Distributed solar, particularly rooftop and agricultural solar, is growing quickly in India. How does executing distributed solar differ from utility-scale projects in terms of complexity, quality control, and return on investment?
Shobit Rai: Fundamentally different businesses, and the industry doesn’t say that clearly enough.
Utility-scale is a logistics and procurement game. One site, one grid connection, one client. Manageable with strong project management.
Distributed solar means executing 400-600 installations across multiple districts simultaneously. Each site has its own structural assessment, net metering application, DISCOM relationship, and consumer dynamics. Quality control at that scale cannot depend on supervision; it has to be embedded in process standardization, materials kitting, and installer training.
The return profile reflects this. Distributed solar margins per MW are higher than utility-scale, but operational complexity per MW is exponentially greater. Working capital is brutal, retail and SME customers have slower payment cycles, and government subsidy disbursements under schemes like PM Surya Ghar don’t always align with project cash flows.
The companies that crack this at scale will build technology-enabled execution platforms, digital site assessment, standardized BoS kits, and mobile-first installer management. It’s a platform business, not a project business.
India's Solar Workforce Must Grow Fivefold by 2030
StartupTalky: Skilled manpower for large-scale solar installation and commissioning is a persistent gap in India's renewable sector. How is Prozeal approaching workforce development, and what training infrastructure does the industry need to build to support 500 GW by 2030?
Shobit Rai: India currently has roughly 1-1.2 lakh skilled solar workers. Credible estimates suggest 500 GW by 2030 requires 5-7 lakh trained, certified professionals. That’s a 5x increase in six years. It won’t happen organically.
At Prozeal, we run structured internal certification, tiered technical training, and engineering college partnerships. But honestly, this is insufficient at the sector scale.
What's needed: updated solar curriculum within colleges or ITIs reflecting actual site conditions, not modules written five years ago for outdated technology. A nationally recognized certification framework so a trained installer from one state is credibly deployable anywhere without every EPC running redundant vetting. And real industry co-investment, large EPCs and developers need to fund this meaningfully, not just endorse policy papers, because manpower shortage ultimately shows up as a cost overrun on every project we execute.
The Biggest Customer Misconceptions About Solar Projects
StartupTalky: What do customers, whether industrial, commercial, or government, most commonly misunderstand about the true cost and long-term performance of a solar EPC project, and what should they be asking that they are not?
Shobit Rai: Three things come up constantly.
First, installed capacity is not energy yield. A 1 MW system in Rajasthan might realistically deliver 1,600-1,700 MWh annually when well-executed. A poorly executed or maintained one might deliver 1,300 MWh. That 20-25% performance gap, compounded over 25 years, is financially enormous, yet customers rarely ask the right questions about performance guarantee structures.
Second, the cheapest EPC bid is rarely the cheapest project. An INR 15 lakh per MW price difference at signing can easily become INR 5-100 lakh per MW in warranty disputes, equipment replacements, and O&M firefighting within five years. The question customers should ask is not “what is your per-MW cost” but “what is your performance guarantee, and what are your penalty provisions for under delivery?”
Third, almost nobody asks about regulatory risk. Net metering policies, banking regulations, and open access frameworks have shifted materially across multiple states in the last four years. A project modelled on 12-month energy banking under a policy later revised to 3-month banking can see its effective ROI drop significantly. Customers should demand regulatory stress-testing as part of every financial model presented to them.
The 500 GW target is real and achievable. But only if we stop papering over the execution gaps that sit between ambition and ground reality.
StartupTalky- Business News, Insights and StoriesApoorva Bajj
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