New Delhi, Oct. 7 — India's solar capacity rose from under 3 GW in 2014 to 168 GW by August, amid growing demand for clean power. However, steep US tariffs on solar cells and panels from India, Indonesia and Laos threaten to hit a rapidly growing industry. Uneven growth in India's solar energy sector is also posing challenges.
Factories make far more modules than India needs, but too few of the cells that go into them. The grid receives more solar power at noon than it can absorb, and the batteries that could store the surplus are getting costlier. India's goal of 500 GW of non-fossil capacity by 2030 hinges on fixing these imbalances.
India's solar build-out has expanded rapidly. In FY26, the country installed 44.6 GW of solar capacity, nearly double the previous year, per government data. According to JMK Research, utility-scale installations alone doubled, from 16.9 GW in FY25 to 34.8 GW in FY26.
Three forces drove the boom. The first was cost. Falling module prices and competitive auctions pushed tariffs from about Rs.12 a unit in 2010 to under Rs.2.50. The second was regulation. Discoms must source a rising share of their power from renewables, nearly 36% in 2026-27. The third was corporate buyers, including data centre operators, signing long-term contracts for clean power.Government schemes widened the base. Distributed solar, led by PM Surya Ghar rooftops and PM-KUSUM farm projects, accounted for over a third of all solar added last year. Demand is expected to pick up.However, concern lies in what the pace of the boom has set off. Manufacturers rushed to build factories, mostly in the easiest part of the supply chain. And much of the new generation arrives around noon.
For Indian solar module makers, the US served as a safety valve. As Washington shut out Chinese panels, and later those made in Southeast Asia, Indian suppliers filled the gap. At its peak, the American market absorbed about half of India's module output.
That has changed now. In September, the US Commerce Department finalized steep anti-dumping and countervailing duties on Indian solar cells and modules, after ruling that producers had sold them below fair value, as part of Trump's broader plan to bring manufacturing back to America. Total imports by the US had already halved in 2025 and declined further in Q1 2026.
One reason is that the US market itself has also changed. Tax credits under the Inflation Reduction Act helped American factories build about 70 GW of module capacity. US buyers now want cells, not finished panels. India cannot supply them because it does not make enough cells even for its own needs. Other markets offer little relief. Europe imposes carbon and traceability rules, while Africa and West Asia are smaller.
India's solar manufacturing boom has been lopsided. Nearly all new investment went into assembling modules, the last and simplest step in making a solar panel. The harder upstream steps, making cells and the wafers they are built on, were largely skipped. The reason is economics. Per gigawatt, a cell plant costs roughly four times as much as a module line and takes nearly twice as long to build. Wafer plants are costlier still. So capital chased the easy option. In the first half of 2026, India added 50.6 GW of module capacity but only 9.7 GW of cell capacity.
This created two problems. Module capacity far exceeds domestic demand, leaving many factories underused and margins thin. Cells, meanwhile, remain scarce. Most of those made in India are used in-house by integrated manufacturers. Standalone assemblers still rely on imports, largely from China, and cell and module imports rose 18% in the first half of 2026. Policy is now trying to push manufacturing upstream. Since June 1, discoms and government-backed projects must use approved Indian cells. This could address some of the gaps.
Rooftop solar has emerged as a primary driver of India's clean energy expansion. In FY26, distributed solar solutions contributed 16.3 GW, accounting for 36% of India's 44.61 GW annual solar capacity additions. Of this, rooftop systems accounted for 8.7 GW. This was driven by central government schemes, financial assistance, and collateral-free loans.
However, this rapid rise in behind-the-meter rooftop generation has had unintended consequences for grid operations and utility economics. Panels produce the most electricity around midday, but India's demand mostly peaks in the evening. On sunny days, this mismatch floods the grid with more power than it can use, and prices collapse.
On 5 April, afternoon prices on the Indian Energy Exchange's Real-Time Market fell to almost zero. When supply runs too far ahead of demand, grid operators must order solar plants to cut output. Coal plants cannot run below a technical minimum, so solar gives way. Over the January-March quarter, total inter-state curtailments reached 470 GWh. Each curtailment costs developers revenue and strains their finances.
Batteries are the obvious fix for the noon glut. They can store surplus solar power at midday and release it in the evening. Agencies have moved quickly: storage-linked tenders made up nearly 40% of renewable capacity auctioned in FY26, up from 5% two years ago. Building that storage has proved harder. India commissioned only about 2.6 GWh of battery storage in FY26, according to JMK Research.
That is a small fraction of the 45-50 GWh due over the next two years.The biggest obstacle is cost. Developers bid low in 2024 and 2025, assuming battery prices would keep falling. Instead, geopolitical tensions and material shortages pushed prices up by about a third in 2026. Lithium carbonate futures, an indicator of the main variable cost in the cells, nearly tripled from a May 2025 low to about 192,000 yuan a tonne in May 2026. Despite the recent decline, they were still roughly double the levels seen in May 2025.
Crisil Ratings estimates that 12 GWh of storage under construction will now earn less than investors expect. About 8-9 GWh capacity risks delay.The way ahead lies upstream, capital-heavy steps to boost cells, wafers and storage.www.howindialives.com is a database and search engine for public data.
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