Whalesbook
India's clean energy ministry is reviewing petitions regarding a June mandate that requires solar power projects to use only domestically manufactured solar cells. This policy, aimed at strengthening India's clean energy supply chain, risks causing a significant shortage and could delay renewable energy targets while driving up costs.
Capacity Gap Fuels Shortage Fears
The nation's domestic solar cell manufacturing capacity is currently around 25.6 GW, far below the estimated annual demand of roughly 50 GW. This shortfall has traditionally required heavy reliance on imports, with China supplying over 90% of India's solar cells. The upcoming mandate, intended to boost local production, could create a scarcity of compliant cells. Industry groups warn that immediate enforcement could disrupt India's 170 GW solar module manufacturing capacity and delay renewable projects. They also note that about 55% of locally produced solar cells use older technologies.
Policy Goals Clash With Market Needs
India's push for local sourcing is central to its strategy for building strong domestic clean energy supply chains and meeting its 2070 net-zero emissions goal. Schemes like the Production Linked Incentive (PLI) and the Approved List of Models and Manufacturers (ALMM) have helped expand solar manufacturing capacity. India's module manufacturing capacity is set to reach about 210 GW by December 2025, but cell production capacity is projected to lag at around 27 GW by the same period.
Global solar panel prices are also expected to rise in 2026 due to factors like geopolitical tensions, higher energy and logistics costs, and China's tighter supply control. Additionally, China's decision to cut its VAT export refund on solar PV modules from 9% to 0% starting April 1, 2026, will impact global pricing. India's domestic mandate could worsen these price pressures for developers.
Past Policies Raise Cost Concerns
Previous attempts to require local content in India have drawn criticism. Studies show these policies can increase solar PV power costs by approximately 6% per kWh and have made Indian solar panels pricier than global options, without necessarily boosting exports or technology.
The current mandate for solar cells, though driven by energy security and growth goals, carries similar risks of higher costs and trade issues.
Industry Seeks Policy Delay to Ease Supply
Developers are asking for a phased rollout or a delay of about nine months. This would allow around 50 GW of new domestic solar cell capacity, currently under construction, to come online, potentially easing immediate supply issues. The ministry's decision will significantly affect the pace and cost of India's green energy transition.
India is set to become a major player in the global solar market, projected as the world's second-largest by annual installations in 2026. The industry's request for a reprieve or staggered implementation highlights the challenge of matching manufacturing growth with policy deadlines. The government's decision will determine if India can overcome this hurdle and maintain its rapid deployment towards its 500 GW non-fossil fuel capacity target by 2030.