India’s Solar Module Overcapacity: Factory Utilization Plummets

India’s solar module factories are operating at a critically low utilization rate, an estimated 35-40%, according to a recent report by the Institute for Energy Economics and Financial Analysis (IEEFA) and JMK Research. This rate falls significantly below the sustainable range of 50-65%.

The root cause lies in a massive overcapacity within the module manufacturing segment, which has surged to 233 gigawatts (GW) by June 2026. This capacity far outstrips India’s upstream capabilities in cells, wafers, and polysilicon.

Key Manufacturing Imbalances

India’s solar manufacturing landscape presents critical figures from the IEEFA and JMK Research report. Factory utilization stands at a mere 35-40%, significantly below the sustainable range of 50-65%.

The nation’s module capacity reached 233 GW by June 2026. This module capacity is nearly seven times its cell capacity and a staggering 116 times its ingot-wafer capacity.

An additional 135 GW of capacity is either planned or under construction. Anticipated new demand by 2030 is 17-22 GW from sectors like data centers, green hydrogen, ammonia, and exports.

Export challenges include US duties exceeding 200% on most Indian manufacturers. This resulted in a 44-47% reduction in exports to the US from their FY24 peak.

Understanding the Supply Chain Disparity

The core issue stems from an underdeveloped upstream segment, including cells, wafers, and polysilicon, which creates heavy reliance on imports, primarily from China. This imbalance is projected to persist until at least 2030, even with anticipated domestic growth.

Prabhakar Sharma of JMK Research warned that “standalone module manufacturers face a significant risk of stranded assets due to increasing pressure on utilization, margins, and returns.” This highlights the financial precariousness of non-integrated players.

Export Challenges and Opportunities

Despite strong anticipated growth in India’s solar deployment, new domestic demand of 17-22 GW by 2030 is unlikely to fully absorb the planned capacity expansion. Exports are considered crucial, but face significant hurdles in key markets.

The primary export market, the US, has been disrupted by duties exceeding 200% on most Indian manufacturers. This has led to a substantial 44-47% reduction in exports to the US from their FY24 peak, impacting overall export potential.

The European Union is identified as a potential alternative market. Its supply-chain and sourcing rules encourage diversification, presenting an opportunity for Indian manufacturers to pivot their export focus.

Path to Sustainable Growth

To unlock new export markets and effectively compete with Chinese manufacturers, India must invest strategically in its upstream manufacturing base. This includes intensive research and development in polysilicon, ingots, wafers, and cells.

Charith Konda of IEEFA emphasized this necessity, stating, “for India to unlock new export markets and compete with Chinese manufacturers, it must invest in R&D and the manufacturing of polysilicon, ingots, wafers, and cells.” Closing the cost and technology gap requires scale, integration, and operational efficiency.

The report suggests several key recommendations for fostering a more robust and competitive solar manufacturing ecosystem in India. These measures are designed to address the current overcapacity and supply chain dependencies.

Incentives should be distributed across the entire value chain, covering cells, wafers, and polysilicon, rather than focusing solely on modules. Fostering industry-research collaboration is also critical for innovation and technological advancement.

Targeted, time-bound support for exporters is recommended to help Indian firms navigate international markets and compete effectively. Leveraging India’s involvement in the Pax Silica coalition offers an opportunity to diversify silicon inputs and reduce reliance on China.

Furthermore, faster power transmission and right-of-way clearances are essential to support domestic deployment goals. Establishing a framework for repowering aging solar assets can also contribute to long-term sustainability and efficiency within the sector.

These strategic investments and policy shifts are essential for India to transform its solar manufacturing sector from a state of overcapacity to one of competitive, integrated growth on the global stage.