Solar Landscape in India
India's ambition to achieve 500 GW of renewable energy by 2030 hinges significantly on solar power, which is projected to account for over 60 percent of the total capacity. To meet this target, India must scale its solar installations to 50-60 GW annually.

By FY24, India had installed over 80 GW of solar capacity. However, the country faces major challenges in meeting this demand domestically, as its solar manufacturing sector remains heavily reliant on imports, particularly from China.

In 2023 alone, India added 20.8 GW of solar module capacity and 3.2 GW of solar cell capacity. Projections suggest that within the next 5 years, India's solar module manufacturing capacity will exceed 150 GW, and solar cell capacity will surpass 75 GW - critical steps toward reducing import dependence and achieving renewable energy goals.

However, India's solar manufacturing sector primarily assembles solar modules from imported components, such as polysilicon and wafers, resulting in only 30-40 percent local value addition. Furthermore, the country does not produce solar cells using indigenous raw materials, like silica sand, which deepens its import dependency. As a result, India’s domestic manufacturing sector operates at just 40-45 percent capacity utilisation, with an operational output of 7 GW that meets only about 35 percent of domestic demand.

Players like Adani, Waaree, and others have now shifted their focus toward manufacturing the entire solar value chain domestically (from silica to modules), potentially increasing India’s local value addition share by 2030.

Global Landscape for Solar Manufacturing
Governments and companies across the globe are aiming to integrate the entire value chain in-house to lower costs, improve operational efficiency, and generate more job opportunities. Although, this strategy from various countries faces significant barriers from China’s stronghold, ever-evolving technologies, and mature export market in this space.

China’s Stronghold Over Solar Manufacturing Value Chain
China’s competitive advantage stems from its large-scale production, low electricity costs, and fully integrated manufacturing process, which allows Chinese companies to offer solar equipment at lower prices than Indian manufacturers.

Additionally, China’s substantial investments in R&D and strong government incentives position it as a dominant player in the global solar market, controlling more than 80 percent of global solar production. China can produce solar modules at costs 30-65 percent lower than the US and Europe, which gives the country a competitive advantage in the global market.

Global solar PV manufacturing capacity has increasingly moved from Europe, Japan, and the United States to China over the last decade. China has invested over USD 50 Billion in new PV supply capacity, ten times more than Europe.

Ever-evolving Photovoltaic Technology
While Passivated Emitter and Rear Contact (PERC) cells remain dominant, innovations like N-type TOPCon and Silicon Heterojunction (SHJ) cells are gaining momentum due to their higher efficiency and better performance at lower costs. Additionally, breakthroughs such as perovskite-silicon tandem solar cells, which exceed 30 percent efficiency, are emerging. However, module life is currently limiting its implementation, commercially.

These next-generation technologies promise significant improvements in efficiency, material usage, and power output, positioning them as key drivers for global growth in solar energy. To remain competitive, India must embrace these advancements. Without adopting these cutting-edge technologies, India risks falling behind as the global solar industry evolves.

India’s solar manufacturing sector also faces technological challenges. Monocrystalline modules account for 67.5 percent of the total production. Polycrystalline modules follow at 15.1 percent, while Tunnel Oxide Passivated Contact (TOPCon) modules and thin-film technologies make up smaller shares of 12.3 percent and 5.1 percent, respectively. China, on the other hand, has increasingly transitioned to N-type based technologies (TOPCon and SHJ) reaping cost efficiencies at scale.

Mature Export Market and India’s Dependency
China's solar module exports have risen 34 percent YoY, growing from 85 GW in the first half of 2022 to 114 GW in the same period this year, almost matching the total exports of 2021. This volume could power Sweden and is equivalent to the entire solar capacity of the US (113 GW).

China is India's largest supplier, providing USD 3.89B worth of solar cells and modules, which accounts for 62.6 percent of total imports. It is followed by Vietnam (USD 1.02B, 16.5 percent), Malaysia (USD 549.8M, 8.9 percent), and Thailand (USD 248.8M, 4 percent).

In 2023, India imported 16.2 GW of solar modules, a 158 percent year-over-year increase, and 15.6 GW of solar cells, up from 5.8 GW in 2022. India’s solar module exports reached 4.8 GW in 2023, a 204 percent increase from 2022. However, these exports remain modest compared to the volume of imports, highlighting the ongoing limitations of India's domestic manufacturing capabilities.

Strategies to Transition Towards Domestic Manufacturing

Friendly Regulatory Policies

Trade Restrictions to Decrease China's Influence
Countries worldwide are increasingly implementing customs duties as a strategy to curb imports, protect local industries, and promote domestic growth. These sanctions are only expected to increase further as China continues to dominate the space.

The Indian government has imposed a 40 percent customs duty on Chinese solar modules and 25 percent on solar cells, increasing installation costs by 20-30 percent and slowing project growth. Similarly, India levies high duties on imported cars – 100 percent for those above USD 40K, 60 percent for those below, and 125 percent on used cars aiming to shield domestic production and reduce the appeal of imported vehicles.

In the US, a tariff of 50 percent has been proposed for polysilicon used in solar panels starting 2025. Most US solar panel imports now come from Southeast Asia. Washington has doubled tariffs on Chinese panels to 50 percent.

The Way Forward
India must also focus on boosting upstream solar production, from raw materials like silica sand to the manufacturing of finished solar panels. By building domestic capabilities to produce polysilicon, wafers, and cells, India can reduce its reliance on imports and improve the cost efficiency of its solar manufacturing sector.