fdb already wrote that there is no adequate Indo-European etymology and most likely it is a loan from the Pre-Greek substratum. That being said, another etymology has been in circulation for many decades - its connection to the word 'sun' in PIE (i.e. *séh2u̯el-; see below). This is what Michel Lejeune wrote in his "Phonétique historique du mycénien et du grec ancien" (1972/2017, p. 135):
"L'altération de *sw ancien est donc établie par une série d'exemples sûrs. Cependant, on a supposé que, dans quelques racines, le grec aurait conservé le groupe ancien *sw- (comme il aurait, dans quelques racines, conservé le groupe *sm-, §113); aux approches de l'époque historique, ϝ se serait amuï dans ce groupe initial, ainsi réduit a σ: par example dans σέλας "éclat" qu'on rapproche de skr. svargáḥ "ciel" [...]. Mais, de ces rapprochements possibles, aucun ne s'impose; ces termes, comme la plupart des mots grecs commençant par σ- devant voyelle, demeurent obscurs. Emprunts?"
Basically, it says that it is possible that in some words *sw might have been preserved (i.e. we end up with PIE *sw > Greek s), we could posit a connection between Greek σέλας and Sanskrit svargáḥ 'heaven'; however, because the origin of the Greek words that start with σ- followed by a vowel remains obscure and the connections are not particularly convincing, Lejeune concludes by saying that such words are probably loans ('emprunts').
cf. Sihler (1995) "the usual etymon, PIE *swelH- 'gleam', is well-attested, but *G σ- < sw is hard to accept" (p. 216; emphasis mine - A.B.).
That being said, different Indo-European cognates have been suggested - the following is mentioned in NIL under PIE *séh2u̯el- 'sun':
- Avestan xvarənah- 'glory, splendour' (Bader 1995, Janda
2004);
- Vedic (Sanskrit) sauvá- 'belonging to the Sun' (Darms 1978),
cf. "Anschluß von gr. σέλας n. 'Licht, Glanz' (Il.+) und/oder aav. jav. xvarənah- n. ~ 'Ruhmesglanz' an das Word für 'Sonne' wurde oft erwogen" (NIL, p. 611, note 16).
However, fdb agrees with Silher that:
Greek s < sw is without parallel. Besides, there is the semantic difficulty of the proposed shift of meaning from “sun” to “moon”. The Greek descendant of *swel-nā seems to be εἵλη “warmth of the sun”. The same root (IE *swel-) is also the source of Avestan xvarənah- according to Almut Hintze, Der Zamyād Yašt, pp. 28-33 (with detailed discussion of other proposals).