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5 Reasons From Industry To Downplay Risks Of Solar Manufacturing Overcapacity
India’s solar manufacturing sector has been abuzz with concerns over potential overcapacity, with research firms such as ICRA projecting that solar photovoltaic (PV) module manufacturing capacity could rise to over 165 GW by March 2027 from around 109 GW at present. Wood Mackenzie has also warned that inventory levels could reach 29 GW by the third quarter of 2025. With a slew of manufacturing firms also publicly listed now, these firms have been mounting a determined defence of the probable market outlook, especially against the ‘ exaggerated risk’ of overcapacity as they put it. 
Here are five reasons why industry leaders believe manufacturing overcapacity fears in India’s solar sector may be overstated.

A major technological shift is underway as several manufacturers transition away from older technologies to current tech. Alpex Solar, for instance, changed its plans for expansion from mono PERC to high-efficiency TOPCon technology. The firm has plans to expand from 1.6 GW to 2.2 GW of capacity with an investment of approximately ₹136 crore. Firms are making the shift at an increasing speed to not only survive in a market where technology cycles are barely 3 years or more, but also because costs are not so high. This obsolescence factor is something Prashant Mathur at Saatvik Green Energy has highlighted as well in analysts’ calls. 
The latest technological transition could partly be driven by a sharp reduction in polysilicon consumption per watt of solar cell production—from 5.6 grams in 2015 to approximately 2 grams per watt in 2024—according to an IEA PV trend report. The decline is attributed to technological advancements such as the adoption of thinner wafers, the shift to high-efficiency N-type monocrystalline silicon, and the introduction of advanced architectures like TOPCon and heterojunction (HJT) cells.
Another factor often overlooked in overcapacity discussions is how capacity additions are measured. India’s solar industry uses both DC (direct current) and AC (alternating current) metrics to indicate plant capacity, which can create confusion about actual demand and supply. Nameplate capacity of the manufacturing firms typically refers to AC capacity.
Waaree Energies’ Chief Executive Officer (CEO), Amit Paithankar, explained this distinction in an investor call. He noted that there is typically a 1.3x–1.4x difference between DC and AC capacity. For example, to deliver 40 GW of AC power to the grid, a company would require around 60–65 GW of DC solar panels. 
This means the actual demand for modules is significantly higher than grid-connected figures or winning bids suggest. Most of these projects require domestically made cells—and increasingly, ingots and wafers—reshaping market dynamics in favor of backward-integrated manufacturers.
Supporting this view, Saatvik Solar CEO Prashant Mathur added that while installed capacity may appear high on paper, actual capacity utilization at many manufacturing plants is well below 40% in many cases, limiting the risk from overcapacity. Overall, industry leaders aver that the best case for capacity utilisation would be 70-80%, and not any higher. 
Emerging sectors such as green hydrogen and data centers are expected to drive significant new energy demand. These technologies will require large-scale solar capacity and locally manufactured cells, ingots, and wafers, creating new outlets for India’s solar production.
Amit Paithankar underscored this during an investor call, noting that backward-integrated companies are best positioned to capture future demand. “In the out years, if you consider 237 GW of solar that India needs to deploy by 2030, demand is only going up,” he said. “And what is not factored in yet are two major drivers—data centers and green hydrogen.”
He added that export opportunities could further balance the domestic market, as India explores free trade agreements (FTAs) with the European Union, Great Britain, Australia, GCC countries, and Africa. “We are closely watching these developments,” he said, indicating that such deals could open new markets for Indian-made solar components.
Some manufacturers argue that any glut is largely confined to the non-DCR (Domestic Content Requirement) category. Despite concerns about non-DCR overcapacity, Premier Energies asserted that it continues to secure large orders at stable price levels. The company explained that it dynamically manages its production mix—choosing between DCR and non-DCR orders—based on backlog and long-term client relationships with independent power producers (IPPs).
Premier Energies,  thus, takes DCR orders, which tie up both its cell and module capacity while selling output separately in the non-DCR market, where demand and margins remain strong, as explained by Vinay Rustagi,  its Chief Business Officer.
Finally, industry leaders suggest that even if overcapacity emerges, it will likely accelerate consolidation and strengthen vertically integrated players. Larger manufacturers with backward and forward integration will be better positioned to weather competitive pressures and control costs. ICRA anticipates that companies heading for vertically integrated manufacturing can benefit over the long term giving them greater control over the supply chain.
With the implementation of the Approved List of Models and Manufacturers (ALMM), EPC companies can no longer import Chinese modules freely, giving integrated domestic manufacturers a competitive advantage.
Going beyond these reasons is the matter of what manufacturers refer to as trade and retail demand on an ongoing basis for rooftop solar, which is not factored into their order books by most manufacturers. This demand creates an additional buffer against any order drops or cancellations on the order book.
Finally, at least two industry experts we spoke to highlighted how capacity projections have been built around announcements by firms, but a number of these announcements have failed to stick to projected timelines. Firms that have won awards under the PLI scheme are a good example, with most 1 year or even two years behind scheduled commissionings. What that means is that projected capacity additions from here on may not be quite as rapid as many have projected based on announcements. The ALMM list is also likely to see a faster rate of phasing out in the coming months, as older lines go down or face upgrade requirements. Focus, in fact, is likely to shift to the ALCM list, and the pace of additions there is to keep up with cell demand for DCR modules.
While India’s demand graph would point to a clear risk of overcapacity if one goes by the bare numbers, it needs a more nuanced take on risks to major players. The high demand for DCR modules will remain well into FY27, providing integrated players a clear advantage over modules-only players or those behind the cell manufacturing curve.
Thus, the impact of overcapacity, when it does strike, will be felt more by such players. At a rough benchmark, players below 5 GW module capacity with no cell manufacturing will face pressure first.
With a new technology cycle of back-contact cells already starting, by 2028, perhaps some of the developers who have entered manufacturing might also rethink plans to continue in the business or sell out to focus on their core IPP business. After all, the expansion into manufacturing for most was driven more by market uncertainty on the availability of modules, their access to financing, and an extraordinary window of opportunity for superior margins. As that window closes slowly, many may not be as comfortable with the nitty-gritty of running a manufacturing business as well.            
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