India’s solar module overcapacity pushes factory utilization to 35–40%

India has gone 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. However, manufacturing capacity has expanded faster than market demand, leaving factories operating at just 35% to 40% utilization, below the 50% to 65% generally considered necessary for sustainable operations.

A new report by the Institute for Energy Economics and Financial Analysis (IEEFA) and JMK Research, “Assessing overcapacity risk in India’s solar PV manufacturing market,” finds that 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, according to the report. This has left upstream segments such as cells, wafers and polysilicon relatively 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.”

The report says the imbalance is unlikely to ease by 2030. Solar deployment in India 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.

Exports could therefore play an increasingly important role. India’s module exports are highly concentrated in the United States, which accounted for around 97% of export volumes in fiscal 2026, according to the report.

That market has been disrupted by combined US duties exceeding 200% for most Indian manufacturers. The report says the measures have contributed to a 44% to 47% decline in exports to the United States from their fiscal 2024 peak. The European Union could provide a medium-term alternative as its supply-chain and sourcing policies increasingly encourage diversification.

“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 and a contributing author of the report.

“But market access alone will not be enough,” Konda added. “Sustained export growth depends on closing the cost and technology gap with China through scale, integration, and operational efficiency.”

The report expects the widening gap between manufacturing capacity and demand to drive changes across the industry. Smaller, non-integrated manufacturers are likely to face greater pressure, while larger, vertically integrated producers could be better positioned to withstand lower utilization rates.

The researchers also expect Indian manufacturing to move further upstream, from modules into cells, wafers and eventually polysilicon, reducing dependence on imported inputs.

“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 and a co-author of the report.

Tewani said incentives should be distributed more evenly across cells, wafers and polysilicon rather than concentrated on modules, alongside stronger industry-research collaboration and targeted, time-bound support for exporters.

“India’s entry into the Pax Silica coalition is a real opportunity to diversify silicon inputs and cut its reliance on China,” said Pulkit Moudgil, senior research associate at JMK Research and a co-author of the report.

The report also calls for faster transmission development and right-of-way (RoW) clearances to support domestic solar deployment, as well as a framework for repowering aging solar projects.

The researchers conclude that the current module manufacturing surplus could be a transitional feature of India’s rapidly expanding solar industry. They said stronger demand, industry consolidation and more disciplined investment in upstream manufacturing could help rebalance the sector over the coming decade.