India’s solar energy sector is entering a period of rapid expansion, with projections indicating 85-90 GW of new capacity between FY26 and FY27. A recent SBI Caps report highlights residential rooftop solar installations as a key driver of this growth. The demand for solar power is set to rise sharply, with FY25 alone expected to see capacity additions double to 30 GW.
While the growth outlook is strong, the success of these projections depends on several factors. A crucial element is the reduction of the gap between power purchase agreements (PPA) and power sale agreements (PSA). Additionally, the government’s PM-Suryaghar Muft Bijlee Yojana, aimed at providing free electricity to millions of households, must be completed by FY28. Compliance with Renewable Purchase Obligations (RPOs) by industries and state utilities will also be essential.
However, challenges remain. Land availability for large-scale solar projects is a major concern, along with state-level net metering policies that restrict solar energy adoption. Another hurdle is the Approved List of Cell Manufacturers (ALCM), which mandates the use of specific, government-approved solar modules. This policy, while aimed at boosting domestic manufacturing, could slow down the pace of installations.
Despite these challenges, the push for domestic solar manufacturing is gaining momentum. India’s annual solar module demand is projected to hit 100 GW, with an estimated 90 GW of government-approved (ALMM) modules needed by FY27. However, a significant portion of solar cells will still have to be imported, as domestic manufacturing capacity remains insufficient.
To further reduce reliance on imports, the government is introducing a mandatory Approved List of Solar Cells by June 1, 2026, similar to its existing module list. This step aims to strengthen India’s solar supply chain. Even so, domestic content requirement (DCR) modules will likely remain expensive due to high demand driven by government schemes.
As India ramps up cell production, the next big step is to develop wafer and ingot manufacturing—the foundation for solar module production. The government is expected to allocate $1 billion in incentives to encourage local manufacturing, reducing dependence on global supply chains.
With the right policies, efficient execution, and strong investment, India’s solar power capacity could witness unprecedented growth. While hurdles remain, the country is on track to become a global leader in solar energy, ensuring cleaner and more sustainable power for the future.