Wood Mackenzie says in a new report that India’s solar energy production is at risk of overcapacity and calls for a shift from expansion to cost competitiveness.
IndiaSolar panel production capacity is on track to surpass 125 GW by 2025, more than triple current domestic market demand of around 40 GW, according to analysis by Wooden Mackenzie.
The consultancy said in its latest report that this growth will lead to an inventory build of 29 GW by the third quarter of 2025. This figure is comparable to an inventory build-up of 13 GW from the last quarter of 2023, and 22 GW from the last quarter of 2024.
Wood Mackenzie said the capacity expansion highlights the success of the country’s production-linked incentive (PLI) program but comes at a time when India is seeing a sharp downturn in its primary export market.
Due to the 50% reciprocal tariffs imposed by the United States, India’s solar panel exports to the US fell by 52% in the first half of 2025 compared to the first half of 2024.
“The Indian government’s PLI program has been very effective in encouraging factory announcements, but the industry is now seeing warning signs of rapid overcapacity, similar to those that preceded the recent price slump in China,” said Yana Hryshko, head of solar supply chain research at Wood Mackenzie.
Cost differences are now a major challenge for the Indian solar energy production market. A module assembled in India using imported solar cells would cost at least $0.03/W more than a fully imported Chinese module, while a module made entirely in India under new domestic requirements would cost more than double that of Chinese-manufactured modules, Wood Mackenzie said.
Hryshko added that despite such near-term challenges, India still has the clearest potential to become the “only credible, large-scale alternative to China’s solar supply chain.” She suggested that India’s success now depends on shifting from just building capacity to achieving cost competitiveness.
“This requires a shift toward aggressive research and development, investments in next-generation technology and a strategic push to open new export markets in Africa, Latin America and Europe,” Hryshko said. “The foundation has been laid; this is the next step towards long-term success.”
Wood Mackenzie’s analysis also indicates that India is deploying robust protective measures to support domestic manufacturers, including a Approved list of models and manufacturers (ALMM) and a recommended one 30% anti-dumping duty on Chinese cells and modules.
By the end of the first half of the year, India’s PLI program was established 18.5 GW of module capacity, 9.7 GW of solar cell capacity and 2.2 GW of ingot wafer capacity. Government figures also show that the scheme allocated a total of 48 GW of module manufacturer capacity on the same date.
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