India’s Solar Push to Drive 45 GW Module Demand Annually: CareEdge

India’s ALMM-I listed module capacity has more than doubled from ~38 GWp at the end of March 2024 to ~91 GWp at the end of June 2025 (108 GWp overall, including smaller and near-obsolete capacities as per CareEdge Ratings’ estimates), driven by strong demand for domestic modules.

It predicts a ramp-up in solar module manufacturing capacity, aided by the swift payback period given the high returns on offer, and by the fact that module manufacturing, similar to an assembly-line process, involves relatively limited complexities.

Cell Manufacturing

The CareEdge report found that solar cell manufacturing entails nearly five times the capex compared to a module plant of a comparable scale. The study showed: "With China dominating the global supply chain and its reluctance to share technology, equipment, and manpower, this segment faces significant entry barriers."

In India, the report noted a sharp rise in solar cell manufacturing from ~8 GWp at the end of March 2024 to ~27 GWp at the end of June 2025, owing to manufacturers’ focus on backward integration for cost efficiency.

However, the research shows that solar cell capacity still trails module capacity by a wide margin, limiting the availability of domestically manufactured cells. Moreover, the study found the effective domestic supply to be considerably lower than nameplate capacity, as a significant share of production is exported to the US market, where there are tariff and non-tariff barriers on imports from China and Southeast Asia, which are the competing exporters.

India installed 24 GWAC of solar capacity in FY25, and with a typical DC top-up of 30%, the total module offtake is estimated at ~31 GWp. Going forward, CareEdge Ratings expects average annual domestic solar capacity additions to reach ~35 GWAC, implying an annual module requirement of ~45 GWp.

Exhibit 2 in the report, as shared above, reflects the current solar module and cell capacity. While the difference appears to be significant, ~50 GWp of solar cell capacity is currently under implementation; however, this will become operational in a phased manner over the next few years.

On the other hand, while a portion of upcoming capacity can use non-indigenous cells, a substantial share, particularly projects awarded post the cutoff date and DCR-oriented bids, must use domestically manufactured cells.

However, given the relatively low domestic cell manufacturing capacity, the government appears to have deferred timelines to avoid disrupting renewable capacity growth. The report associates the supply gap with the fact that only 13 GWp has been admitted to ALMM-II, indicating that nearly 50% of installed capacity has yet to stabilise sufficiently to qualify for listing.

For projects awarded from December 2024, the study suggests that they will have lower costs, leading to reduced tariffs. It noted that since December 09, 2024, India’s central renewable energy implementing agencies (REIAs) have awarded renewable energy (RE) capacity of ~12.0 GWAC as of July 2025 end, encompassing hybrid and complex (round-the-clock (RTC) / Firm and Dispatchable RE (FDRE) configurations. 

On the other hand, based on the evaluation by the CareEdge report, there has been a reduction in the share of plain vanilla solar capacity in 2025, amidst a broader shift towards storage-based tenders. Solar capacity continues to be a significant component within hybrid and complex project structures, said the research. 

Impact of module and BoS on solar tariffs 

Shang an insight on the impact on DCR modules, the report said, "They are currently sold at a premium of 4-5 cents/Wp over non-DCR modules, and hence developers, while bidding for these projects, are likely to have factored this additional cost into their bid tariffs for eligible projects."

CareEdge Ratings estimates that replacing DCR modules with non-DCR modules, under the recent relaxation, could reduce the capital cost for the solar component across these RE projects by approximately ~₹0.45 crore/MWp.

"Assuming a plain vanilla solar project, the actual tariff could get negotiated downwards by ₹0.3-0.4 per unit over the tariffs that were determined. In the case of hybrid or storage-based projects, a similar reduction is expected, albeit to a lesser extent, given the smaller share of solar capacity in the overall project configuration," the research added. 

The study, in its analysis, said, "Revision in the applicability timeline of ALMM-II for RE tenders could place capacities awarded at relatively higher tariffs during the December 2024 - July 2025 period in a state of uncertainty. Developers may face tariff renegotiations, potential cancellations by ultimate offtakers, or regulatory hurdles in securing approval for the bid tariffs." 

CareEdge Ratings’ View 

“The revision in the framework for the applicability of ALMM-II modules is likely to bring its own set of complications. While it ensures continuity in India’s renewable energy growth trajectory, which the limited availability of domestic cells could have jeopardised, the frequent policy shifts present a unique challenge for regulators and offtakers. Whether and how REIAs can enforce a reverse change-in-law interpretation remains uncertain and could mark a first for the industry,” stated Jatin Arya, Director, CareEdge Ratings.

“Furthermore, if these bids come up before regulators for a downward tariff revision, the situation could become more complex, as developers may contend that they have already placed orders with domestic suppliers, and reversing these could result in material losses. Even if such projects move forward, they are likely to face prolonged regulatory scrutiny and an extended gestation period before resolution,” Arya added.