India's solar module factories run at 35-40% utilization amid overcapacity, report finds

India's solar module boom hits overcapacity wall

India has transformed from relying on imports for more than 90% of its solar modules to becoming the world's second-largest solar module manufacturing hub, with 233 GW of production capacity as of June 2026, according to a new report by the Institute for Energy Economics and Financial Analysis (IEEFA) and JMK Research. But that capacity has expanded faster than the market can absorb, leaving factories running at just 35% to 40% utilization, below the 50% to 65% generally considered necessary for sustainable operations, the report finds.

The report, titled "Assessing overcapacity risk in India's solar PV manufacturing market," says manufacturing expansion has been heavily concentrated in modules. India's module manufacturing capacity is now nearly seven times its cell capacity and 116 times its ingot and wafer capacity, leaving upstream segments such as cells, wafers, and polysilicon underdeveloped and the supply chain dependent on imported inputs, predominantly from China.

"India has added module capacity faster than the market can absorb it," said Prabhakar Sharma, senior consultant at JMK Research and lead author of the report. "With around 135 GW more already planned or under construction and factories running at 35–40%, the pressure on utilization, margins, and returns will only intensify. Standalone module manufacturers face a real risk of stranded assets."

Imbalance expected to persist to 2030

The report says the imbalance is unlikely to ease by 2030. India's solar deployment is expected to grow strongly, but not quickly enough to absorb the manufacturing capacity already committed.

Additional demand from data centers, green hydrogen and ammonia production, and exports could add 17 GW to 22 GW by 2030, according to the report. Green hydrogen represents the largest potential source of additional demand because of the dedicated renewable energy capacity required for its production. However, the researchers said this additional demand would be insufficient to fully absorb planned manufacturing expansion.

Export challenges and opportunities

Exports will be pivotal, and here the picture is shifting fast. India's export base is heavily exposed to a single market: the US absorbed around 97% of module export volume in financial year 2026. That channel has since been disrupted by combined US duties exceeding 200% on most Indian manufacturers, which cut exports to the US by 44–47% from their FY2024 peak, the report states.

The European Union, whose recent supply-chain and sourcing rules increasingly reward diversification, now offers the most structured medium-term alternative, according to the report.

"India may have the opportunity to unlock new export markets, provided Indian solar PV manufacturers can effectively compete with Chinese manufacturers by investing in R&D and the manufacturing of polysilicon, ingots, wafers, and cells," said Charith Konda, lead energy specialist at IEEFA.

Path forward: upstream integration and policy support

The report suggests the current surplus could be a transitional feature of India's rapidly expanding solar industry. Stronger demand, industry consolidation, and more disciplined investment in upstream manufacturing could help rebalance the sector over the coming decade.

Smaller, non-integrated manufacturers will come under greater pressure, while larger, vertically integrated players are positioned to gain, the report says. Domestic manufacturing is likely to move upstream from modules into cells, wafers, and eventually polysilicon.

"The challenge is no longer building capacity; it is using it well and deepening the value chain," said Chirag H. Tewani, senior research associate at JMK Research. Tewani added that incentives should be distributed more evenly across cells, wafers, and polysilicon rather than concentrated on modules.

The report also calls for faster power transmission development and right-of-way clearances to sustain domestic solar deployment, and proposes a framework for repowering aging solar projects.

In a separate observation, Pulkit Moudgil, senior research associate at JMK Research, noted that "India's entry into the Pax Silica coalition is a real opportunity to diversify silicon inputs and cut its reliance on China," pointing to a potential avenue for reducing upstream dependence.