India Faces Solar Manufacturing Overcapacity Amid Technological Shifts
India’s renewable energy sector has seen remarkable growth, with solar power capacity surging from under 3 GW in 2014 to 168 GW by August 2026. This expansion has triggered a massive increase in domestic solar module manufacturing, which reached 217 GW. However, the industry now faces significant challenges, including overcapacity, a reliance on outdated technology, and a complex upstream supply chain. While policy measures like the Approved List of Models and Manufacturers (ALMM) have bolstered domestic production, the sector must navigate high capital costs and technological hurdles to remain competitive against global imports.
The rapid rise in module manufacturing capacity has outpaced domestic demand, which is currently projected at 55-60 GWdc annually. Much of the installed capacity remains underutilized because it relies on older technologies like Polycrystalline and MonoPERC, while the market has shifted toward more efficient TOPCon and Heterojunction modules. This supply glut, compounded by the diversion of modules from export markets due to international tariff uncertainties, is expected to drive industry consolidation, particularly affecting smaller, standalone manufacturers.
To address the upstream supply chain, the government extended ALMM requirements to solar PV cells in June 2026. This has spurred investment, with cell manufacturing capacity growing from 13 GW to 35 GW, and projections suggest it could reach 100 GW by late 2027. Despite this growth, cell production remains capital-intensive and technologically demanding, requiring imported equipment and specialized expertise. These factors, along with potential plant stabilization issues, could delay the anticipated capacity expansion.
Further upstream, the production of ingots, wafers, and polysilicon remains the most significant hurdle. While the government has proposed ALMM requirements for wafers starting in June 2028, progress has been slow due to the high costs and technical complexity involved. Without robust policy support, domestic components struggle to compete with Chinese imports. Although vertical integration may offer long-term stability for some manufacturers, the current cost disparity between domestic and imported cells is driving up module prices. Consequently, the capital expenditure for solar projects is expected to rise by 15-17%, likely leading to higher solar tariffs in the near future.
