India's solar manufacturing sector is facing a critical challenge: a boom turned into a glut. But how did this happen?
A tale of success and excess:
India's solar industry, once reliant on imports, witnessed a remarkable transformation. Encouraged by pandemic-induced disruptions and strained ties with China, local production surged. Since 2020, capacity has skyrocketed 13-fold, nearly tripling domestic demand, according to BloombergNEF. But this success has a downside.
The government's cautionary tale:
The government, recognizing the scale of the surge, urged banks to exercise caution in lending to the sector. This caution is warranted, as manufacturers are already pulling back from lower-value output. Capacity utilization at module-assembly plants has dropped significantly, from over 70% to around 40%, according to Avinash Hiranandani, managing director at RenewSys India Pvt. Ltd. This is not a mere slowdown; it's a structural glut, he emphasizes.
Pandemic, policy, and the push for self-reliance:
The pandemic played a pivotal role in India's solar manufacturing story. It revived policymakers' aspirations for domestic capability, leading to import taxes on cells and modules and a preference for homegrown manufacturers. This effectively created a barrier for Chinese suppliers, who previously supplied a significant portion of India's solar modules.
The impact of policy decisions:
These policy moves had an immediate effect. Domestic module capacity expanded rapidly, fueled by investments in the country's energy transition and surging US demand. However, India still relies on China for upstream components like cells and wafers. New mandates aim to change this, requiring locally made cells in all modules sold in the country from June and introducing similar obligations for wafers by 2028.
Glut in the making:
Cell-manufacturing capacity is projected to quadruple in the next two years, reaching 100 gigawatts, according to ICRA Ltd. Sameer Gupta, chairman of Jakson Ltd, warns that this could lead to another glut. Modules coming online after mid-2027 may struggle to find a market, potentially causing financial strain for many companies.
The demand-supply conundrum:
India's demand for solar power is growing, with a record 38 gigawatts installed in 2025, approximately 53 gigawatts in DC terms. However, this demand is outpaced by manufacturing capacity, which stood at about 154 gigawatts at the end of the year. Exports, once a promising avenue, have been hampered by US tariffs and anti-dumping investigations. The Alliance for American Solar Manufacturing and Trade seeks duties of 214% on Indian solar supplies, adding to the industry's woes.
Seeking global solutions:
To address these challenges, Rishabh Jain from the Council on Energy Environment and Water suggests exploring alternative overseas markets. This includes emulating China's strategy of using the Export-Import Bank of India to finance solar projects in regions like Africa, with a mandate to use Indian-made modules.
Survival of the fittest:
Industry executives predict a shake-up in the near term, with not all companies surviving the glut. Technological advancements pose a threat to less-advanced manufacturers, who may struggle to keep up with investments. Prashant Mathur, CEO of Saatvik Green Energy Ltd, highlights that nearly 30 gigawatts of India's module capacity uses MonoPERC cells, which are becoming obsolete. Regular and costly technology upgrades will be necessary for survival.
The future of India's solar industry:
As the industry evolves, it's becoming a game for the 'big boys.' Smaller and less-advanced companies may struggle to stay afloat. But is this a fair outcome? Should the government intervene to support struggling manufacturers, or is this a natural consequence of a rapidly changing market? The debate is open, and your thoughts are welcome.
