What are the limits that I’ll be encountering here? Will I encounter any limits to have each unique instance-ip-subdomain ask for a letsencrypt certificate?
You can issue 20 certificates per registered domain. e.g. Let’s Encrypt will stop you after t.example.com
If you can share certificates, you can place up to 100 subdomains on a certificate for a total of 2000 subdomains.
If you need more you could request a rate limit exemption via the form in the rate limit documentation. They receive a lot of requests, so this will take some time. If you decide to do this, please read and answer everything thoroughly to speed up your request and the queue!
Or if you host a number of different customer sites on this domain, it might warrant being placed on the Public Suffix List. But this has implications beyond Let’s Encrypt’s rate limits, so the maintainers of it ask that you have a strong rationale for adding a domain to it.