Renewable energy (RE) plus large hydro-based power generation capacity increased at a compound annual growth rate (CAGR) of ~12% since March 2014 and stood at 296 GW as of August 2026, constituting ~53% of the overall power generating capacity, led by strong policy support and improving tariff competitiveness. The solar power segment remained the key driver of capacity addition in the RE sector, with installed capacity increasing from less than 3 GW in March 2014 to 168 GW in August 2026.
In anticipation of healthy growth prospects, India’s solar photovoltaic (PV) module manufacturing capacity increased significantly from less than 20 GW in 2022 to 217 GW as of August 2026. This expansion was supported by favourable policy measures, specifically the approved list of models and manufacturers (ALMM), which effectively restricted the direct import of solar modules.
However, the operational module manufacturing capacity is lower than installed capacity, given that some module facilities continue to be constrained by older technologies (Polycrystalline and MonoPERC) and lower-wattage modules that no longer align with current market demand which is tilted towards TOPCon and Heterojunction modules.
Nevertheless, even after factoring in the lower operational capacity, the annual solar module production is expected to be higher than the projected annual solar capacity installation of 55-60 gigawatt direct current (GWdc). Further, uncertainty surrounding U.S. tariff measures has led to a diversion of modules from export markets to the domestic market, exacerbating supply pressures. Hence, the overcapacity in module production will likely accelerate consolidation in the module manufacturing industry, directly impacting the smaller, pure-play module players.
Just as the ALMM support led to capacity addition in the module manufacturing space, the extension of ALMM requirements to solar photovoltaic (PV) cells from June 2026 has accelerated investments in cell capacity addition. Consequently, cell manufacturing capacity has increased from 13 GW in July 2025 to 35 GW as of August 2026 and is likely to increase to 100 GW by December 2027.
However, cell manufacturing is more capital intensive, with investment requirement of INR 400-500 crore per GW compared to INR 80-90 crore per GW for module manufacturing. Further, cell manufacturing remains considerably more challenging than module manufacturing from a technology perspective, with reliance on imported equipment.
Consequently, ongoing geopolitical uncertainties affecting equipment sourcing, coupled with plant stabilisation issues post commissioning, could delay cell capacity addition across players.
Further upstream in the solar manufacturing value chain are ingot, wafer and polysilicon manufacturing, which are more technologically complex than module and cell manufacturing. ALMM list for solar wafers, which requires manufacturers to have equivalent ingot manufacturing capacity, is proposed to become effective from June 2028. However, this list will not be issued unless there are at least three wafer manufacturing units with aggregate capacity of 15 GW per annum.
While one player has completed an ingot and wafer facility (2 GW), the overall progress towards wafer and polysilicon capacity addition remains slow despite plans announced by the big players. Further, in absence of policy support such as ALMM, the domestic manufactured components are unlikely to be competitive vis-à-vis Chinese imports. This reflects the technological complexity of ingot and wafer manufacturing, along with challenges related to process know-how and technology transfer. Other factors hindering growth in the polysilicon and wafer segment include the high capital and operational costs of setting up the plant.
Hence, the pace of domestic ingot/wafer capacity addition remains to be seen. Nevertheless, the vertically integrated manufacturers are expected to benefit in the long term due to greater control over the supply chain.
Based on prevailing imported cell prices and considering the operating costs for domestic original equipment manufacturers (OEMs), the landed cost of modules from domestic OEMs using imported solar PV cells comes at 13-15 cents/watt. However, given the significant capacity addition in module manufacturing, these prices have come under pressure, thereby impacting the profitability for standalone module manufacturers.
Further, the cost of manufacturing solar PV cells in India is higher than the cost of imported PV cells and thus, the cost of modules manufactured using domestic cells comes at 21-23 cents/watt. With these changes, the capex cost for solar plant is likely to increase by around 15-17%, thereby leading to increase in solar tariffs going forward.
While domestic cell manufacturers currently benefit from limited domestic capacity, resulting in relatively higher margins than standalone module manufacturers and higher module prices for modules manufactured using domestic cells, both margins and prices are expected to moderate over the medium term as additional cell manufacturing capacity is commissioned and manufacturers achieve scale efficiencies in cell production. However, the implementation of ALMM requirements for wafers from June 2028 could partially offset the expected moderation by increasing module prices, while also resulting in higher project costs and, consequently, exerting upward pressure on solar power tariffs.
The views and opinions expressed in this article are the author’s own, and do not necessarily reflect those held by pv magazine.
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