Why Solar Stocks Like Waaree Energies, Premier Energies and Others are down by 35%?

Synopsis: Solar stocks, including Premier Energies and Waaree Energies have corrected upto 35% due to global oversupply, U.S. trade restrictions, grid and storage bottlenecks, and rising equipment costs, highlighting the widening gap between India’s long-term renewable ambition and near-term execution challenges.

India’s solar sector, once among the strongest performers in the equity markets, has entered a phase of sharp correction. Stocks such as Premier Energies and Waaree Energies have seen steep declines over the past three months, raising concerns among investors about whether the downturn is temporary or structural.

The correction has come despite strong long-term policy support for renewable energy, highlighting the growing gap between long-term optimism and short-term execution challenges facing the sector.

Sharp Stock Correction 

Premier Energies has fallen around 31 percent over the last three months, while Waaree Energies has declined nearly 27 percent during the same period. The correction reflects not just company-specific issues but a broader re-rating of solar stocks after a strong rally in earlier years. Valuations had factored in aggressive capacity expansion, stable exports, and smooth domestic execution, assumptions that are now being questioned by the market.

What are the Challenges?

Oversupply and Weak Demand

One of the biggest challenges solar companies are facing is the growing mismatch between supply and demand. Global photovoltaic manufacturing capacity, especially in China, has expanded far faster than installation demand. This has led to excess inventory and aggressive price undercutting, dragging down module and cell prices worldwide.

For Indian manufacturers, this oversupply environment makes it difficult to maintain pricing power, particularly in export markets. Even domestically, intense competition has limited the ability of companies to fully pass on higher costs, resulting in margin compression and weaker profitability outlooks. The Indian solar manufacturing capacity has exceeded 125 GW whereas demand is 40 GW and the inventory surplus is 29GW.

U.S Anti Dumping measure

Trade-related uncertainties have added another layer of stress. The U.S. has continued to tighten anti-dumping measures on solar imports, increasing compliance costs and limiting export opportunities for manufacturers linked to global supply chains. These restrictions have reduced visibility on overseas orders, which had been a key growth driver for several Indian solar players.

The U.S president trump has said that they will not provide land for solar and wind energy projects as they are destroying land for farmers. He claims that about 4,24,000 areas of land were affected by solar and wind development in 2020 and has also imposed a 50 percent tariff on solar panels from India which impacted 90 percent of India’s module export revenue.

China’s Export Tax Rebate

A major global development impacting solar stocks is China’s decision to cancel value-added tax export rebates for photovoltaic products from April 1, 2026, reduce from 9 percent to 6 percent, and gradually eliminate rebates for battery products by January 2027. Chinese authorities have stated that the move is aimed at curbing excessive price wars and addressing overcapacity in the sector.

Chinese exporters had been using tax rebates to discount products aggressively in overseas markets, and their removal could disrupt pricing benchmarks and supply contracts. Indian solar companies, which compete directly with Chinese players or rely on components from China, may face short-term volatility in costs and demand patterns.

Lack of Storage Capacity

Another structural weakness affecting the sector is the lack of adequate energy storage infrastructure. Solar power generation peaks during daylight hours, but without sufficient battery storage, excess power often cannot be absorbed by the grid. This has led to frequent curtailments, particularly in high-capacity states such as Rajasthan, Gujarat, Maharashtra, and Tamil Nadu.

This not only reduces revenue realization for developers but also affects demand for new modules and equipment. When developers face uncertainty over power evacuation and payments, they slow down new project announcements, directly impacting order flows for solar manufacturers.

Grid Infrastructure

Power curtailment has been one of the most damaging operational challenges. Between March and August 2025, Rajasthan alone witnessed nearly 4 GW of solar and wind power curtailment due to transmission delays, corridor congestion, and weak demand during an extended monsoon. Developers incurred estimated financial losses of Rs. 2.3 billion to Rs. 2.5 billion during this period.

Other major renewable states such as Gujarat, Maharashtra, and Tamil Nadu reported 10 percent–30 percent curtailment during peak solar generation hours. In Rajasthan, delays of over 18 months in a key transmission strengthening project constrained the evacuation of 8.1 GW of renewable power from designated energy zones, worsening revenue uncertainty across the sector.

Rising Equipment and Metal Costs

Cost inflation has compounded sector stress. Transformer prices have more than doubled, rising from approximately Rs. 140 million to Rs. 300 million per unit. Gas-insulated switchgear bay costs have surged from about Rs. 60 million to Rs. 150 million. These sharp increases have raised capital requirements and delayed transmission projects critical for renewable integration.

Solar manufacturers are also facing rising metal prices, including aluminum and copper, squeezing margins in an environment where module prices remain under pressure due to oversupply.

Policy Shifts & Uneven Market Conditions

The phased withdrawal of interstate transmission system (ISTS) charge waivers has raised concerns about higher landed power costs for projects commissioned after 2028. Developers rushing to lock in incentives have faced execution bottlenecks, creating an uneven and volatile market environment.

Aggressive bidding in battery energy storage system auctions, restrictions on energy banking, and changes in rooftop solar regulations across states have further dampened sentiment. These factors collectively increase execution risk, making investors more cautious about near-term earnings sustainability.

Conclusion

The recent fall in solar stocks like Waaree Energies and Premier Energies reflects a convergence of global oversupply, trade disruptions, infrastructure gaps, and policy-related uncertainties rather than a collapse of the sector’s long-term prospects. India’s renewable energy ambitions remain intact, but the path forward is becoming more complex and capital-intensive.

Until issues related to grid capacity, storage infrastructure, cost pressures, and global trade stability are addressed, solar stocks may continue to face volatility. For investors, the current phase underscores the importance of distinguishing between long-term structural growth and short-term operational and policy challenges shaping the sector today.

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