India's Solar Export Boom Raises Concerns Over Domestic Supply

India's Solar Export Boom Raises Concerns Over Domestic Supply

India's solar energy sector is experiencing a significant surge in exports, driven by increased global demand and favorable trade conditions. However, this rapid growth in exports is raising concerns about the availability of solar modules for domestic consumption, potentially impacting the country's renewable energy goals.

Export Growth and Domestic Implications

Between fiscal years 2022 and 2024, India's solar module and cell exports expanded dramatically, increasing 23-fold to nearly $2 billion. The United States has emerged as the primary destination for these exports, accounting for over 90% of India's solar exports in fiscal year 2024. This shift is largely attributed to the U.S. imposing restrictions on Chinese solar imports, prompting American buyers to seek alternatives, with India being a key beneficiary .

While this export boom benefits India's economy, it has led to a supply-demand imbalance within the domestic market. Indian manufacturers are prioritizing higher-margin export orders, resulting in a reduced supply of solar modules for local projects. Projections indicate that domestic module production will reach approximately 28 GW in fiscal year 2025 and 35 GW in 2026. However, after accounting for exports, the available supply for domestic use is expected to be only 21 GW and 25 GW, respectively. This falls short of the estimated annual requirement of 30 GW needed to meet India's 2030 renewable energy targets .

Challenges for Domestic Projects

The supply constraints are particularly affecting smaller domestic initiatives, such as residential rooftop solar projects, which rely on smaller batch orders and are sensitive to price fluctuations. Government-led programs like the PM Surya Ghar and PM-KUSUM schemes are also facing challenges due to limited module availability, potentially hindering their implementation and success .

Despite efforts to boost domestic manufacturing through initiatives like the Production Linked Incentive (PLI) scheme and the imposition of basic customs duties on imports, India's solar industry remains dependent on imports for critical components. The country relies heavily on imports for polysilicon and wafers, essential materials for solar cell production. This dependency poses risks to the stability and self-reliance of India's solar manufacturing sector .

Future Outlook

India's solar module manufacturing capacity is projected to increase significantly, with expectations of reaching 50 GW by 2027. However, the anticipated surge in production may not immediately alleviate the domestic supply shortage, as much of the new capacity is expected to come online in the latter part of the forecast period. Additionally, upcoming regulations, such as the introduction of ALMM-II in 2026, which will restrict the use of imported cells in government projects, could further strain domestic supply .

Balancing the lucrative export market with the need to meet domestic renewable energy goals presents a complex challenge for India. Ensuring adequate domestic supply while capitalizing on export opportunities will require strategic planning and policy adjustments to support the sustainable growth of the country's solar energy sector.

Source: Outlook Business