SBI Capital warns that rapid capacity growth, limited cell and upstream manufacturing, and shrinking export markets may challenge India’s green energy trajectory

India’s solar industry may encounter an oversupply situation as cumulative installations are projected to touch 190 gigawatts by 2027, SBI Capital said in its latest report. The risk is heightened by reduced export opportunities after the United States rolled back incentives for solar projects, the report pointed out.

Annual capacity additions are expected to remain in the 40–50 GW range to meet renewable energy goals, which would require a steady module manufacturing base of 100 GW. Over the last two years, India’s module manufacturing ecosystem has grown sharply, now approaching 100 GW.

This expansion was fueled by schemes such as the Production Linked Incentive (PLI) and the Approved List of Models and Manufacturers (ALMM), alongside favourable global policies. A 60 per cent YoY rise in solar installations during FY25, reaching 24 GW, boosted module demand to around 50 GWdc.

However, the report highlighted gaps in upstream integration. While module production is robust, solar cell capacity remains below 30 GW. The rollout of ALMM-II from 31 August 2025, making only projects using cells from approved domestic manufacturers eligible for procurement, is expected to strengthen the cell segment, particularly in the commercial and industrial (C&I) market under net metering and open access frameworks.

SBI Capital noted that cell capacity is likely to expand significantly in the medium term, but until then, limited domestic supply may increase project costs and dampen bidding activity. Some relief could come from clarity on timelines and exemptions for 100 GW of projects bid out since December 2024.

It further flagged India’s negligible presence in wafer and polysilicon manufacturing. Although a target of 40 GW wafer capacity has been set for March 2027, progress on the ground remains modest. Rising global polysilicon prices have also compressed margins for international players lacking full value-chain integration.