India is striving for self-sufficiency in solar energy, and is making efforts to reduce dependence on imported modules and panels. However, the situation is murky, with multiple challenges emerging as opportunities open up for local manufacturers.

The country’s move to ramp up solar projects is part of its ambitious target of achieving 500 gigawatts of non-fossil fuel capacity by 2031-2032. Renewable energy installations in India reached a record high of 7.1GW in March 2024, bringing the total installed capacity to 18.5GW for the fiscal year from April 1 2023 to March 31 2024, according to research firm Rystad Energy.

The growth was primarily driven by solar installations, which grew by 23% from the previous fiscal year (FY2022-23), as numerous projects within India's inter-state transmission system network and ultra-mega solar park schemes were commissioned.

However, India’s solar energy installations have relied heavily on imports from China for many years. In FY2021-22, China accounted for 92% of the total import value of solar PV cells and modules in the country, data from the Indian Ministry of New and Renewable Energy show.

To reduce its dependence on Chinese imports, India has been trying to diversify its import markets, sourcing solar panels from other Southeast Asian countries such as Vietnam, Malaysia, Thailand, and Cambodia. As a result, the proportion of solar cells and panels imported from China fell to 64.6% in FY2022-23.

The Indian government has further tightened import regulations in the solar industry to boost domestic manufacturing. It has banned the importation of solar panels since April 1, 2024. But even before that, the importation of solar panels has been on the decline, with the value plunging to US$943.5 million in FY2022-23 from US$3.36 billion in the previous fiscal year, government figures show. At the same time, local manufacturers have been taking measures to improve their capability.

Solar panels consist of multiple interconnected solar cells. These cells are arranged in a larger panel or module to generate a higher amount of electricity collectively. India is targeting 280GW of solar power by 2030. To achieve this, it has to install about 25GW of capacity every year. However, the domestic capacity for making solar cells is not enough to meet such a huge demand.

This is due not only to a lack of raw materials but also, more significantly, to cost competitiveness given China’s full supply chain. Indian project contractors still need to import solar cells from China, partly because local manufacturers are targeting US importers.

The Indian government has launched an Approved List of Models and Manufacturers (ALMM) for solar panels. Only those on the list can be used for solar projects in the country. The list applies to government-tendered utility-scale solar projects, rooftop solar (net-metering), corporate PPA (power purchase agreement) market, and other government schemes. Both domestic and foreign manufacturers can have their products included in the ALMM. However, the mandate gives domestic manufacturers the opportunity to serve a sizable market by creating a non-tariff barrier for Chinese products.

Notwithstanding the huge domestic demand for solar panels, Indian manufacturers are looking to expand to overseas markets. The United States has emerged as a major export destination due to its high demand for solar energy and the potential for strong profit margins. In FY2022-23, India’s solar module shipments to the US amounted to US$1.03 billion, or 97% of the total export value. The Uyghur Forced Labour Prevention Act (UFLPA) in the US also played a role in this shift from China towards Indian imports.

While rising shipments of solar panels to the US market demonstrate India’s export potential, Indian manufacturers encounter stiff competition from Southeast Asian peers, who maintain an edge by utilizing material inputs from China, resulting in lower costs. There has also been a pushback from US solar panel manufacturers, who have asked their Commerce Department to impose tariffs on solar cell imports, particularly from Cambodia, Malaysia, Thailand and Vietnam, to protect local production.