India’s solar equipment manufacturing capacity is expected to experience significant growth in the next 2-3 years, with projected capacities of approximately 80 GW and 50 GW, respectively.
India plans to invest nearly Rs 1 lakh crore in solar modules, with an estimated debt funding of Rs 70,000 crore over the medium term, according to a CareEdge Ratings report.
The researchers noted that tariff barriers on imported cells and modules have increased domestic module cost competitiveness, but international prices remain low. The Approved List of Models and Manufacturers for Solar Modules (ALMM-I) is expected to boost demand for domestic modules.
India RE Capacity:
India’s renewable energy capacity reached 155 GW in September 2024, with solar being the largest contributor at 91 GW. The growth is driven by policy focus, tariff competitiveness, and investor interest. CareEdge Ratings expects annual installations to surpass 35 GW over the next two years, with 20 GW from rooftop, hybrid, and off-grid solar.
Over the next 2-3 years, annual solar open access capacities of 4-5 GW are expected to be increased due to corporate ESG commitments and improved economic viability of C&I projects.
Leading module manufacturers plan to add 80 GW of capacity, requiring a capex of Rs 12,000 crore over 2-3 years. India’s domestic cell capacity is predicted to reach 60 GW by FY27, driven by an investment of Rs 30,000 crore and progressive backward integration, making it a surplus market, the CareEdge report said.
Policy support:
The Indian government has imposed a 25% and 40% BCD on Chinese cells and modules from April 1, 2022, to protect domestic cells and modules from predatory pricing.BCD increases landed costs for imported modules and cells, but DCR modules are pricier due to the global module price decline. Nonetheless, BCD remains crucial for domestic module cost-competitiveness.
Central government schemes: The government has mandated the procurement of DCR modules for capacities under the following schemes:
| CPSU scheme – VGF support outlay of nearly Rs 8,600 crore for setting up 12 GW solar projects by central PSUs, out of which nearly 8 GW capacity has been awarded till H1-FY25 |
| PM Surya Ghar Muft Bijli Yojana – capital subsidy outlay of Rs 75,000 crore targeting 1 crore households, amounting to ~25 GW residential rooftop solar installations over the next 2-3 years |
| PM KUSUM Yojana—financial support of Rs 34,400 crore allocated for a decentralized solar capacity of ~9 GW to be set up by farmers |
ALMM:
The Indian government implemented ALMM-I, requiring domestic modules for all solar projects, from 1st April 2024. This change, despite initial deferral, led to a surge in module imports in H2-FY24, resulting in $4.35 billion in FY24. However, imports moderated to $1.02 billion in the first half of FY25, likely due to increased domestic cell supply as Indian players scaled up cell capacities.
PLI:
The PLI scheme has allocated Rs 18,000 crore for solar equipment capacity, with upcoming capacities of 50 GW for cells and 80 GW for modules. However, issues like capital equipment shortages and skilled labor have hindered progress. The solar equipment sector is expected to have a capex of nearly Rs 1 lakh crore, with debt funding of nearly Rs 70,000 crore over the next 3-5 years.
Challenges:
Overcapacity in Chinese manufacturing has led to low prices in export markets, including India, causing surplus production to flood non-US markets. This has resulted in a drop in the landed cost of imported modules in India to around 18 cents/Wp, offsetting the impact of the Base Cost Curve (BCD). Domestic modules have also seen a significant drop, from 41 cents/Wp to 20 cents/Wp. Despite this, non-tariff barriers and government-sponsored schemes are expected to push demand towards domestic modules.
CareEdge Ratings View:
“The solar equipment manufacturing sector has several tailwinds, including healthy domestic demand prospects, rising export opportunities, proactive policy support, and improved lenders’ appetite for RE projects. However, lack of integrated solar equipment capacity, supply chain dependence on China, increasing competitive intensity, and delay in RE capacity additions due to systemic issues are some headwinds that remain monitorable over the medium term,” stated Jatin Arya, Director, CareEdge Ratings.
Summing up:
India’s solar module exports to international markets have grown significantly over the FY23-FY24 period, with the USA remaining the most lucrative market for Indian exporters.
The US government has imposed anti-dumping duties on Chinese modules since 2012, but the Uyghur Forced Labor Prevention Act (UFLPA) has been a major game-changer. The US government has implemented investment incentives through the Inflation Reduction Act, which has added nearly 35 GW of module capacity to the US till October 2024.
Indian manufacturers have announced cell and module capacities through joint ventures. Indian module exports to the US surged to $1.97 billion in FY24, while cell exports to the US increased to $55 million due to growing demand for non-Chinese cells.
Despite UFLPA scrutiny and slow solar installations, India’s strong export order book and progressive decoupling with China keep the prospects bright, CareEdge said.
