India’s solar sector crossed a structural inflection point in 2025. While cumulative installations moved beyond 129 GW, the year’s defining transformation was not scale alone but a decisive shift toward domestic manufacturing depth, grid reliability and dispatchable solar and wind hybrid renewable power. The industry moved away from a deployment-only mindset to one increasingly shaped by supply-chain resilience and system-level performance.“As of mid-2025, India has clearly moved from a deployment-led model to a manufacturing-first and reliability-focused solar ecosystem,” said Gagan Chanana, Joint MD and CEO, Jakson Solar Modules and Cells.
Policy acted as the primary catalyst. Measures such as the Production Linked Incentive scheme, Approved List of Models and Manufacturers (ALLM) enforcement, basic customs duties, domestic content rules, GST rationalisation and the Draft Electricity (Amendment) Bill 2025 collectively signalled a long-term commitment to building an “Atmanirbhar” clean-energy ecosystem spanning solar, solar + wind hybrid,storage and green hydrogen. “Policy instruments such as ALMM, PLI, import duty structures and the Draft Electricity (Amendment) Bill, 2025 all point in one direction — solar, renewable storage and green hydrogen are the future,” said Gyanesh Chaudhary, Chairman and Managing Director, Vikram Solar.
Manufacturing capacity expanded rapidly. Module production crossed 100 GW in 2025 and is expected to reach 130 GW by 2026, comfortably exceeding the annual domestic demand. However, upstream integration remains uneven..“Cell capacity is around 27 GW, far short of expected demand approaching 50 to 60 GW, and wafer production remains limited,” Chanana noted. As a result, import dependence has shifted from finished modules, to cells and wafers rather than disappearing altogether
Even in balance-of-system segments such as trackers and mounting structures, cables, transformers, equipment and components for pooling substation localisation has progressed but remains incomplete for specialised components and materials. “Most of our structures and key components are already made in India through multiple local partners, but some upstream items still rely on imports,” said Vikas Bansal, CEO – International, GameChange Solar.
PLI-linked projects delivered visible progress but exposed structural constraints. While several module and cell factories began commissioning, upstream facilities faced longer gestation periods due to equipment availability , complexity, technology stabilisation and skilled manpower shortages. This misalignment between manufacturing readiness and project execution affected land preparation, EPC schedules and grid connectivity. “Project timelines and manufacturing readiness do not always move at the same pace,” Bansal said.
Solar’s next phase will also be shaped by financing realities. While module manufacturing has attracted large capital flows, debt for storage-backed and hybrid projects remains cautious, with lenders still assessing long-term revenue visibility, degradation risks and evolving tariff structures. Higher interest rates have compressed project returns, particularly for battery-heavy tenders with longer payback periods. At the same time, the financial health of state-owned distribution companies continues to pose an underlying risk. Payment delays, curtailment disputes and occasional contract renegotiations persist across several states, nudging developers and investors to increasingly favour commercial and industrial consumers as more reliable offtake partners.
Chaudhary added that despite delays, the scheme altered long-term investment behaviour: “PLI did exactly what it was meant to do — it created conviction for companies to commit to integrated fabs and signalled long-term policy stability.” On the power-system side, solar proved indispensable during a year when peak demand crossed 250 GW. Midday generation reduced pressure on thermal plants, moderated market prices and prevented deeper shortages in several states.“Without solar’s contribution, daytime grid stress would have been considerably higher,” Chanana said.
However, the limitations of a solar-heavy system without adequate storage became increasingly evident during evening peaks. Despite over 80 GWh of battery storage capacity being announced, operational installations remain below 1 GWh. Land acquisition constraints and transmission bottlenecks further complicated deployment in high-renewable states.“Solar added a lot of capacity, but storage and transmission must catch up,” Bansal warned.
Land and permitting are emerging as equally binding constraints. Large contiguous parcels in solar-heavy states such as Madhya Pradesh, Rajasthan and Gujarat are becoming costlier and harder to secure, while transmission corridor availability, environmental clearances and local stakeholder negotiations are lengthening development cycles. These pressures are beginning to accelerate interest in alternatives such as brownfield redevelopment, floating solar and projects co-located with wind or storage assets. In parallel, manufacturers are starting to look outward: with domestic module capacity approaching surplus, export markets in the Middle East, Africa and parts of Europe are becoming increasingly important to absorb scale and establish India as a credible supplier beyond its home market. The US is not any more an attractive market for exporting cells, modules and solar equipment due to high tariffs.
By late 2025, the sector’s priorities had clearly shifted from headline capacity additions to grid integration. Hybrid solar-wind-storage tenders accounted for nearly half of new clean-energy bids, while standalone battery auctions expanded sharply. “The market clearly shifted from prioritising low-cost solar to procuring firm and dispatchable renewable power,” Chanana said. Looking ahead to 2026, project design is expected to revolve around storage optimisation, advanced controls, trackers and hybrid configurations. “FDRE, RTC and solar-plus-storage tenders are becoming mainstream,” Bansal said, arguing that dispatchability will matter more than tariffs alone. Chaudhary framed the shift in macro terms: “The world is moving into an almost infinite energy-demand environment driven by AI, data centres and electrified industry.”
Chanana pointed to storage as the clearest signal of the sector’s direction: “The rapid mainstreaming of solar-plus-storage is the strongest signal of where India is headed in 2026.” In effect, 2025 marked the end of solar’s first growth cycle in India, defined by speed and scale. The coming year is set to begin its second phase, characterised by manufacturing maturity, storage integration and the transformation of solar from a daytime energy source into the backbone of a grid-ready, industrial-grade power system. |
