India's solar module production has surged to 100 GW, but a report by SBI Capital Markets warns of potential oversupply risks.
With the US reducing incentives for solar projects, exports have declined, raising concerns about domestic overproduction.
Despite strong domestic demand, the shift in US policies could impact India's solar module market dynamics.
Over the past two years, Indian solar module makers have rapidly expanded capacity to around 100 gigawatts (GW). While this has helped reduce India's import dependence on Chinese modules and supported the country's solar growth, a report by SBI Capital Markets Ltd (SBICAPS) has indicated oversupply concerns.
India’s cumulative solar capacity is projected to reach 190 GW by 2027. As local manufacturers ramp up production to meet this demand, there’s a growing risk of oversupply, warned SBICAPS in its August report on power sector. The reasons for this is two-pronged: Sustained preference for cheaper Chinese modules and reduced scope for exports, with the United States removing incentives for solar projects, according to the report.
According to the Institute for Energy Economics and Financial Analysis, the export of Indian photovoltaic (PV) modules has risen exponentially, by more than 23 times, between FY22 and FY24, primarily to the US, which accounted for more than 97 per cent of India’s exports in both FY2023 and FY2024.
The growth to 100 GW has matched rising domestic demand, with solar installations jumping 60 per cent year-on-year (y-o-y) in financial year 2024-25 (FY25) to around 24 GW — requiring nearly 50 gigawatts direct-current (GWdc) of modules.
To meet future targets, annual additions are expected to stay in the 40-50 GW range, justifying the current scale of manufacturing.
“Players who want to take advantage of the lucrative market would look to set up onshore facilities, with a distinct advantage for early movers as the US market is also building up indigenous upstream capacity,” said the authors of the report released August 20, 2025.
Solar module capacity is crucial because it determines how much electricity a solar panel system can generate under ideal conditions and expanding domestic solar module manufacturing capacity is vital for both meeting energy demands and reducing reliance on imports.
Companies which have contributed to increasing domestic manufacturing capacity of solar modules to 100 GW include Waaree Energies, Goldi Solar, Reliance Industries, Emmvee Energy, ReNew Power, Rayzon Solar, among others.
India added 11 GW of solar in Q1 of FY26, the highest ever and almost half the additions seen in FY25. The additional pace of 40 GW per year is well on track to meet the estimated solar capacity by FY30, in line with the healthy pipeline currently, it said.
India exported only 4 GW of solar modules in FY25, down y-o-y due to changes in regulations in the US.
The US administration issued a directive to halt funding from the Inflation Reduction Act of 2022. The subsequent enactment of the ‘One Big Beautiful Bill’ is expected to phase out investment tax credits and production tax credits for solar and wind projects. This has reduced exports of modules to the US, a major export destination for Indian modules. Instead, some players are setting up factories there to adjust to the new Foreign Entity of Concern rules.
As far as domestic consumption is concerned, the report said that it rose 50 per cent in the last financial year.
India has several schemes to promote solar module manufacturing and adoption, including PM Surya Ghar: Muft Bijli Yojana, PM-KUSUM, and the Production Linked Incentive (PLI) scheme for High Efficiency Solar PV Modules.
The PLI Scheme for High Efficiency Solar PV Modules has an overall outlay of Rs 24,000 crore. This scheme is being implemented in two tranches. Tranche I had an outlay of Rs 4,500 crore, while Tranche II has an outlay of Rs 19,500 crore.
Out of the Rs 4,500 crore allocated for the first tranche, Letters of Award were issued to three successful bidders for setting up 8,737 MW of fully integrated solar PV module manufacturing units and for the second tranche, in April 2023, Letters of Award were issued under Tranche II for setting up 39,600 MW of solar PV module manufacturing capacity, as per the Union Ministry of New and Renewable energy.
But demand for domestically produced solar modules reportedly is low due to higher costs compared to imported modules, limited production capacity for high-quality cells and reliance on imports for upstream components, according to private players.
While utility-scale additions rose handsomely, there was a stark rise in non-utility setups which has helped drive demand to the next level. “Demand for modules is expected to remain strong in the medium term. The reimposition of Approved List of Models and Manufacturers (ALMM) from April 2024, led to reduction in imports to Rs 322 billion in FY25, a 38 per cent y-o-y decline,” SBICAPS report said.
However, imports still remained strong due to the rise in non-utility projects, which mostly don’t need ALMM-approved modules. Almost all imports of solar modules and cells came from Chinese companies.