Terraform init fails with "Error: No Terraform configuration files found in working directory"

Problem

When you trigger a run in HCP Terraform, either remotely via the CLI or directly in the UI, the plan may fail with an error message indicating that no Terraform configuration files were found.

Error: No Terraform configuration files found in working directory

Terraform requires configuration files to plan changes. Planning without a
configuration would mark everything for destruction, which is normally not what
is desired. If you would like to destroy everything, queue a destroy plan
instead. Otherwise, create a Terraform configuration file (.tf file), or check
that the working directory is set correctly on the workspace, and try again.

Operation failed: failed checking for terraform files: lstat /home/tfc-agent/.tfc-agent/component/terraform/runs/run-XXXXXXXXXXXXXXXX/config/my_terraform_working_dir: no such file or directory

Cause

When a run begins, HCP Terraform clones the contents of your version control system (VCS) repository into a temporary directory on the execution agent, such as /home/tfc-agent/.tfc-agent/component/terraform/runs/run-XXXXXXXXXXXXXXXX/config/.

If you have specified a path in the workspace's General Settings > Terraform Working Directory, HCP Terraform will attempt to change to that subdirectory before executing terraform plan. The error occurs when the path specified in the Terraform Working Directory setting does not exist in the cloned VCS repository.

Solution

Solution 1: Verify the Terraform Working Directory Path

Ensure the path configured in your HCP Terraform workspace's Terraform Working Directory setting exactly matches a directory path that exists within your VCS repository.

1. Review the error message to identify the directory that HCP Terraform could not find. In the example above, this is my_terraform_working_dir.
2. Navigate to your VCS repository and confirm that this directory exists at the expected path.
3. In the HCP Terraform UI, go to your workspace settings and verify that the value for Terraform Working Directory is correct. If it is incorrect, update it to match the actual path in your repository.

Outcome

After you correct the Terraform Working Directory path to match the structure of your VCS repository, new runs will successfully locate the Terraform configuration files and proceed with the plan.