A solar glut is building in India. Can the industry withstand China-style pain?

From the industrial belts of Gujarat to the outskirts of Bengaluru, factories are churning out solar panels by the millions, their glassy surfaces stacked and shipped across the country. Utility developers, homeowners and farmers are lapping them up, feeding the surge in India’s clean energy push.

For years, India has been hailed as the world’s most credible challenger to China’s command over the solar supply chain. Backed by government incentives and trade protections, Indian solar equipment makers such as Adani Enterprises, Tata Power, Renew Photovoltaics, Waaree Energies and Premier Energies have raced to expand solar module capacity to help meet the country’s ambitious target of installing about 300GW of solar energy by 2030. Reliance Industries also announced extensive plans to build capacity in the space.

But the early boom is showing cracks.

Initial public offerings (IPOs) of Indian solar equipment makers have previously been heavily in demand, but the latest listing of Emmvee Photovoltaic Power ended up with mixed demand. The retail and qualified institutional buyer (QIB) portions were fully booked, but the non-institutional investor (NII) portion remained significantly undersubscribed at 30% in November.

This shift may be due to the large number of clean technology listings, overheating in the country’s module manufacturing segment, the unexpected disappearance of US export potential due to tariff wars, and investors’ closer focus on weakening domestic demand, at least in the short term.

According to BNEF, a commodities research firm, Emmvee’s IPO got about one bid per share on offer, versus Waaree’s 80 bids per share during its IPO last year. At least nine more Indian solar manufacturers have plans to go public.

“Timing the market is not our focus but our company’s performance,” said Suhas Donthi, chief executive officer (CEO) at Emmvee. “We are focused on doing the right business in the right manner and we believe the market will take us to the position it thinks it should.”

Edinburgh-based energy consultant Wood Mackenzie estimates the country’s solar module manufacturing capacity will exceed 125GW by 2025, which is more than three times its domestic demand of around 40GW. Nomura projects capacity additions of 100-110GW in the next three years, further raising the risk of oversupply and painful consolidation. The market is waiting to find out who the survivors of the shakeout will be, as it did in China.

“There will be natural consolidation, and there will be five-seven players who will hold scale advantage,” said Gyanesh Chaudhary, managing director of Vikram Solar, which plans to add a 5GW module manufacturing plant in Tamil Nadu to its current portfolio of 4.5GW.

Warning signs

In 2022, India imposed 40% tariffs on solar modules and 25% tariffs on solar cells to discourage imports from China. Last year, the country dictated that Indian solar power producers must purchase from an approved list of domestic solar-module makers—there are 93 companies in the approved list so far. Similar rules for solar cells will come into effect next year. Further restrictions on imports of ingots and wafers that are building blocks of modules and cells are expected in the coming years.

India wants to aggressively chase renewable-energy targets while reducing dependence on Chinese imports, goals that are sometimes in conflict with each other. Subsidies worth billions of dollars, combined with tariff and non-tariff barriers, have led to supply far exceeding demand.

“Indian government’s production-linked incentive (PLI) scheme has been highly effective in spurring factory announcements, but the industry is now seeing warning signs of rapid overcapacity similar to those that preceded China’s recent price collapse,” said Yana Hryshko, head of solar supply chain research at Wood Mackenzie.

In China, half of the six major solar IPOs of the past two decades now trade below their issue price. In the US, SunPower has filed for bankruptcy. Even today, China’s JA Solar, with nearly 85GW each of ingot-wafer and cell capacity, is valued on par with India’s Waaree Energies, which has only a fraction of that scale.

“In modules, there will be a problem of oversupply, and some of the smaller players will probably disappear from the market,” said Sanjay Varghese, group president, solar manufacturing and solar projects, ReNew Power. “Maybe sometime in the second half of next year and the year after that, you will see more pain in the market.”

Supply chain pain

Some distress from oversupply is already visible in the supply chain. While the large, cash-rich players, including Adani, Waaree and Premier Energies, are tightening their hold on the sector by backward-integrating their supply chain and protecting their future margins, the smaller players are struggling to keep their plants running.

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“We see a lot of desperation to sell because they want to utilise the installed capacity,” said Shobit Rai, managing director at Prozeal Green Energy, which sources 1.2-15 GW of solar modules annually. Prozeal is an independent power producer as well as an engineering, procurement and construction company.

The experience is echoed by Premier Energies, which has seen its clients driving a hard bargain. Until now, the government’s restrictions on imports of cheap Chinese modules had protected them, but now Indian overcapacity is threatening the profitable business.

“Margins in modules are already shrinking because clients are saying why should I pay more when there is so much overcapacity, and there is hardly anything you can bring to the table in a way of differentiation. Some of the module makers in the sector are already making losses,” Vinay Rustagi, Premier Energies’ chief business officer, said.

According to Kotak’s estimates, Premier Energies’ Ebitda margin will shrink from 28.9% this financial year to 16.8% by fiscal 2035. The trend is likely to be replicated across all players in the space.

Ebitda is short for earnings before interest, taxes, depreciation and amortization.

According to Rustagi, the average capacity utilization in the industry has shrunk to about 25%, and 90% of the industry is barely able to run their plants since demand has not kept up with growth in capacity expansion. He said Premier Energies runs at 75% capacity.

“This is the last round of expansion, which is happening. Post this, no one will expand capacity in modules. I expect India will have 150GW of module capacity by 2030, and the rest will consolidate or shut down facilities,” said Vineet Mittal, chairman at Avaada Group.

The company’s solar manufacturing arm is planning an IPO next year.

Mittal said about 25% of module capacity will become obsolete soon, as many well-funded players are upgrading the technology to keep pace with China’s progress.

According to Nomura, currently, only 18% of modules approved under the government’s mandated list are based on the latest TOPCon (tunnel oxide passivated contact) technology. A solar farm using TOPCon cells is better at absorbing solar rays.

“The industry must consider the accelerated pace of technology obsolescence, a trend observed globally. Consequently, investments need to be recouped much more quickly than in other sectors,” said Muralee Krishnan, CEO, Adani Solar.

Where are the buyers?

India’s solar energy capacity currently totals 130GW, according to the ministry of new and renewable energy. India needs to add, on average, 30GW of solar power every year to meet the target of about 300GW by the end of the decade.

While the supply side is putting pressure on the sector, the demand side has not kept pace.

Investors are spooked by the fact that green projects are struggling to find state utilities to buy their electricity. As of September, around 44GW of tendered clean energy capacity, out of 93GW since fiscal year 2024 (FY24), remains without buyers, according to the ministry of new and renewable energy, creating uncertainty around the actual realisable pipeline.

The ministry said in early November that it may look to cancel these projects on a case-by-case basis.

One of the primary reasons for unsigned agreements is that state utilities expect solar prices to fall further, according to JMK Research & Analytics.

The solar power tariff in India has experienced a drastic fall over the last few years. In May, spot electricity power prices in India briefly dropped to near zero on the power exchange due to surplus solar power generation. But overall, solar tariffs have been seeing a downward trend. In July, union minister for new and renewable energy Pralhad Joshi said solar tariffs have fallen 80% over the years.

Without enough storage capacity, excess solar power production has been going to power exchanges, sometimes turning out to be a cheaper alternative to signing long-term purchase contracts.

India’s power grid is struggling to absorb a surge in solar power installations, leading to more ‘curtailment’ that threatens the build-out of renewables.

Curtailments measure how much electricity was generated without finding its way to customers. If some or all projects were to be cancelled, there would be a cascading impact on solar equipment manufacturers, including solar module makers. It would lead to lower order volumes, delivery forecasts, and project planning cycles, JMK Research recently noted.

Trump factor

The future pipeline of solar energy projects has also slowed down this year, raising doubts about the future source of business for solar module makers.

A recent report by rating agency Icra stated that after a sizeable green power capacity of 47.3GW awarded in FY24, followed by 40.6GW in FY25, bidding activity has slowed sharply in the current year with only 5.8GW awarded so far in FY26.

US President Donald Trump’s recent turnabout on India’s clean energy trade has also created uncertainty for the market. About 90% of India’s solar module exports were headed to the US before the reciprocal tariffs were imposed on India. The US is also investigating whether Waaree Energies evaded antidumping and countervailing duties on solar cells from China and other Southeast Asian nations.

“Since last year, the US has become tougher. Traceability documents were being checked and challenged. Customs would get into the scrutiny of your shipments, and then there could be detention at the port. So the kind of margins that were left on the table were not enough to cover those kinds of expenses,” said Prashant Mathur, CEO at Saatvik Green Energy, a solar module manufacturer.

Finding other developed markets is not easy. Europe, for instance, has not banned cheap Chinese modules. Under new domestic content requirements, an entirely ‘Made in India’ module would cost more than double Chinese-manufactured modules, making it uncompetitive without substantial government policy support.

The government’s rooftop solar and solar pump schemes continue to sustain demand for solar panel manufacturers. Rooftop installations have doubled to 1GW per month in July and August, according to Bernstein Research.

“What the street is missing is that it is not a structural but a highly cyclical business where good years don’t last beyond two-three years,” said Nikhil Nigania, energy analyst at Bernstein. He added that wherever the industry sees a surge, from China to the US, it is typically short-lived, driven by temporary government incentives, and oversupply always follows once those fade.

It is not a structural but a highly cyclical business where good years don’t last beyond two-three years. — Nikhil Nigania

According to Nomura, about half of solar module demand comes from utility-scale projects and about 20% from solar rooftop projects.

“There is overcapacity and overvaluation,” said Harsh Singhal, partner at ProsperETE, a climate-focused private equity firm. “Investors need to be careful about how competitive we are vis-à-vis China and how the government will respond to the market going forward.”

A projected increase in power demand across India adds another challenge to the country’s effort to add renewables while weaning itself off cheap Chinese imports. India’s per capita electricity consumption is a third of the global average, according to government estimates, but is expected to surge to power its economic engine.

Men vs boys

The Indian government plans to push panel makers to integrate backwards into cells, wafer and ingot production over the next few years to reduce dependence on Chinese imports, adding further pressure on manufacturers to invest heavily. Beyond modules, other parts of the supply chain will be more difficult and expensive to replicate in India.

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Owing to the complexities involved, the cell is the most capex-intensive segment. According to Nomura, capital expenditure per GW of cells can total ₹6,500 crore versus ₹2,000 crore for modules. Ingots and wafers need up to ₹4,500 to build 1GW capacity.

As the supply glut in modules deepens, large integrated players such as Reliance Industries, Adani Enterprises, Waaree, Premier and Tata Power, which are investing across the value chain, are better positioned to survive.

Smaller downstream firms, still reliant on imported inputs and policy protection, may struggle to compete. The challenge ahead lies in India creating a self-sustaining edge to avoid the global boom-and-bust pattern that has marked this industry elsewhere.

All large and listed players have announced plans to backward integrate, expecting that impending import restrictions further down the value chain will keep profits coming. According to Nomura, 70-80GW of cell capacity additions will come online over the next three years. It is 18.5GW right now.

“Margin will keep shifting from one segment to another, so we feel it is important to play all segments. That is what is happening this year: module margins have come down, but cell margins are still strong,” said ReNew’s Varghese. “Once cell capacity builds up, then cell margins will shrink, but wafer margins would be good,” he added.

Manufacturers relying on older technologies and standalone module lines are likely to be pushed out, while producers with deeper integration, spanning cells, ingots and wafers, are better positioned to endure.

“Those who are vertically integrated will be the last men standing,” said Avaada’s Mittal.