India’s rapidly expanding solar power sector, despite its impressive growth, is now confronting significant challenges from widening regional disparities in capacity installation and a burgeoning manufacturing overcapacity that threatens a supply glut and industry consolidation, says Sudheer Pal Singh.

Even as India’s solar power sector has expanded aggressively over the past few years, two key factors could hinder its growth: Rising regional disparity and consolidation in the domestic solar equipment manufacturing space.
India currently has 157 Gigawatt (Gw) of installed generation capacity in solar power, which has grown exponentially from a paltry 2.8 Gw in 2014, thanks to improvements in technology and a supportive policy environment.
In fact, 2025-26 was a watershed year for India’s solar growth, recording the highest-ever annual solar addition of 44.61 Gw, exceeding a target of 34 Gw and nearly twice the previous record of 23.83 Gw in 2024–25.
The sector is now entering a phase of consolidation, moving away from capacity expansion towards systemic reforms, including grid integration, dispatchable clean energy architecture, and market reforms.
While India is poised to become the world’s second-largest solar market in 2026 in terms of annual installations, geographical diversification remains a key challenge, with seven states accounting for nearly 85 per cent of the total installed solar capacity.
Rajasthan and Gujarat have held the first and the second ranks, respectively, in capacity addition for a decade. Maharashtra and Karnataka have also shown strong upward movement in rankings.
However, many large states like Tamil Nadu, Andhra Pradesh, and Madhya Pradesh have fallen in both rank and share despite early leadership positions.
“This relative decline could be mainly due to the slower pace of new project additions, land acquisition challenges, and grid constraints,” said Yogesh Jambhale, senior manager (research) at Rubix Data Sciences, a Mumbai-based research firm.
A key reason for the concentration is variation in the state policies on land acquisition, say experts.
“Regional concentration is partly structural, as utility-scale solar follows irradiation, contiguous land availability, ease of land access, and evacuation readiness.
Therefore, the answer is not to force projects into weaker locations, but to create better locational signals through state-specific tenders, solar parks in under-represented states, faster transmission planning, and more hybrid or storage-linked procurement closer to demand centres,” said Sharath Rao, visiting fellow at the New Delhi-based Centre for Social and Economic Progress (CSEP).
Given that land is a state subject, broader geographic diversification will require states to build land-banks, streamline approvals, strengthen intra-state evacuation, and use distributed options such as rooftop solar, open-access solar, feeder solarisation and solar pumps to complement large solar parks, he added.
Anujesh Dwivedi, partner at Deloitte India, agreed that regional disparity is borne of a combination of availability of cheap land and solar irradiation — the amount of solar energy received by a specific surface area over a stated period of time — and is also mostly seen in utility-scale solar power.
“In the rooftop space, we even have small states such as Kerala having rooftop solar PV capacity more than that of larger states such as Madhya Pradesh, Tamil Nadu, and Karnataka.
“In the utility-scale space, to reduce regional disparity, policy and regulatory measures can be considered for setting up solar parks with connectivity and land infrastructure, expansion of the green energy corridor infrastructure, and incentives for promotion of land-neutral solutions such as floating-solar and agri-PV solutions,” he said.
Domestic solar industry representatives say investor interest follows stronger project economics.
According to Amit Manohar, secretary general, Indian Solar Manufacturers Association (Isma), India’s solar capacity has clustered in a few states because of superior resource availability, lower land costs, and stronger project economics.
“Rajasthan and Gujarat have emerged as leaders due to these inherent advantages. The policy priority should now be to make more states investment-ready by improving project economics and infrastructure,” he said.
“Strict enforcement of Renewable Purchase Obligations (RPOs), faster transmission expansion under the ISTS network, and state land banks with pre-approved grid connectivity can significantly improve project viability.”
The other issue in India’s solar success story lies on the domestic manufacturing front, which is seeing consolidation amid increasing overcapacity that threatens a supply glut. Solar capacity has expanded at a blistering pace, driven by strong policy support, import substitution efforts, and rising renewable energy ambitions.
The country added 119 Gw of solar module capacity and over 9 Gw of cell capacity in 2025, bringing the total module capacity to about 210 Gw and cell capacity to 27 Gw.
However, this rapid build-out has significantly outpaced domestic demand, which is currently estimated at only 40–45 Gw annually, say experts.
Jambhale points out that industry bodies, including the All India Solar Industries Association (Aisia), have cautioned that India’s module manufacturing base has expanded to nearly four times the annual demand, while BloombergNEF estimates that manufacturing capacity has increased nearly 13-fold since 2020 against only a tripling of domestic demand, creating a supply glut.
“The emerging oversupply is beginning to reshape industry dynamics and competitive positioning. Capacity utilisation at module assembly plants has reportedly fallen to around 40 per cent, compared to over 70 per cent during 2022-23, when export demand from the US remained strong,” he said.
As manufacturers compete in an increasingly crowded market, companies are being forced to recalibrate strategies, improve operational efficiency, and diversify into export opportunities, he said.
“Technology transition is also becoming a major challenge, with nearly 30 Gw of existing capacity still dependent on MonoPERC technology, which is rapidly being replaced by more efficient next-generation technologies such as TOPCon,” Jambhale added.
If the current supply glut persists over the next few years, he warned, the sector is likely to witness increased consolidation, with technologically advanced and vertically integrated players better positioned to survive pricing pressures and sustain competitiveness, while manufacturers operating on older technologies may face margin compression and capacity rationalisation.
However, the problem is not limited to modules alone. Photovoltaic cell production too could grow nearly fourfold to 100 Gw in the next few years, exceeding local demand and intensifying competition further.
While aggressive renewable energy targets, rooftop solar expansion, and government incentives continue to support long-term demand, the current phase is likely to accelerate industry consolidation, favour technologically advanced players, and push Indian manufacturers to increasingly compete on a global scale, according to Rubix Data Sciences.
CSEP’s Rao says the overcapacity concern is real, but is concentrated more in module assembly, where capacity has expanded much faster than domestic demand.
“This could lower utilisation, compress margins and trigger consolidation, but it need not derail long-term solar growth if demand continues to scale.
“The deeper strategic issue is upstream: domestic cell, wafer and polysilicon capacity is still inadequate, and with ALMM for cells from 1 June 2026 and a current DCR and non-DCR module price differential of roughly Rs 7–10 per Watt Peak, policy must carefully balance domestic manufacturing support with affordable solar deployment,” he said.
Dwivedi argues that the surge in India’s domestic module manufacturing capacity needs to be seen in light of the fact that these are not very capital-intensive setups and that such investment decisions are driven by market factors.
“India is emerging as one of the leading solar power equipment manufacturing destinations and consequently a significant portion of the manufacturing capacity is eventually going to serve export demand. Occasional mismatches between the supply and demand side are part and parcel of a market driven system,” he said.
In the long run, experts believe policy measures such as the production-linked incentive scheme for module manufacturing, mandatory use of ALMM-listed solar cells from June 2026, and the introduction of ALMM List-III for ingots and wafers are set to further deepen the domestic manufacturing ecosystem.
According to one estimate, the country’s solar capacity is expected to reach nearly 280–300 Gw by 2030 to support the national target of 500 Gw of non-fossil fuel capacity, with annual installations already moving toward a 50 Gw trajectory.
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