New Delhi, June 27 -- India's green energy companies selling so-called merchant power are caught in a bind, as prices of solar power plunge on plentiful supply and subdued demand growth.

Depressed solar energy prices are weighing on installed and upcoming merchant power totalling 3 giga watt (GW), three people aware of the matter said. Merchant power refers to electricity that is sold on exchanges or through short-term contracts rather than long-term agreements. Companies including Adani Green Energy Ltd, ReNew Energy Global Plc, Acme Solar Holding and Statkraft AS have invested around Rs.15,000 crore in such projects.

On electricity exchanges, green energy prices have declined over the last few years. This year, prices averaged at Rs.3...