India added 6.7 GW of solar capacity in the first quarter (Q1) of 2025, according to Mercom India’s latest Q1 2025 India Solar Market Update Report.

The numbers reflect a 25% year-over-year (YoY) decline compared to the 9 GW added in Q1 2024. Solar installations were also down 14% from the nearly 7.8 GW added in Q4 2024.

Of the total capacity added, 5.5 GW came from large-scale solar projects, with open access installations contributing nearly 19.8% of the new capacity. However, large-scale solar installations dropped 15% quarter-over-quarter (QoQ) and 36% YoY.

Multiple challenges contributed to the slower additions, including the rising cost of domestically manufactured modules, limited availability of domestic content requirement (DCR) modules, and the lack of sufficient substation and transmission infrastructure for power evacuation.

According to Priya Sanjay, Managing Director, Mercom India, the shortage of domestically manufactured DCR modules remains a major concern, with limited availability hampering project execution. Although new manufacturing units are in the pipeline, meaningful capacity increases may not materialize until next year.

Transmission infrastructure continues to be another bottleneck. “Even if someone decides today to commission a substation or a transmission line, it will take 12 to 18 months for it to come online,” said Sanjay.

The government is actively working on expanding the transmission network, but challenges like right-of-way issues often delay construction timelines.

However, a positive development is the emergence of several new manufacturers entering the transformer market. Sanjay noted, “Earlier, everyone went to only a few well-known names, but now new companies with manufacturing capacity are stepping in.”

Despite the headwinds, solar accounted for 54% of the 12.3 GW of new power capacity added in Q1 2025.

Rajasthan and Gujarat led the large-scale solar installations, accounting for 35% and 30% of the quarter’s total, respectively. Maharashtra was third, with 16%.

As of March 2025, India’s cumulative installed solar capacity had reached 104.6 GW. Solar energy represented 22% of the country’s total installed power capacity and 48% of its total installed renewable energy capacity.

Large-scale solar projects comprised over 86% of this total, while rooftop solar installations accounted for approximately 14%.

Rajasthan remained the leading state in cumulative large-scale solar capacity, with 29% of the national total. Gujarat and Karnataka followed, comprising 17% and 13%, respectively.

Outlook

Looking ahead, India’s large-scale solar project pipeline stood at 180.4 GW at the end of Q1 2025. In addition, 127.8 GW worth of projects had been tendered and were awaiting auction.

The average cost of large-scale solar projects rose by 3% QoQ and 1% YoY, highlighting the inflationary pressures faced by developers.

Tenders for 14.4 GW capacity were announced during the quarter, a 53% decline from the same period of the previous year, although they were up by 5% from Q4 2024.

On the decline in tenders, Sanjay pointed out that there is a significant backlog of power sale agreements. “Most developers are backed by foreign investors who need visibility on fund deployment. When tendered projects don’t move forward, funding is stalled,” she said. This lack of clarity impacts capital allocation, especially since international investors require well-defined timelines for project development and execution.

Meanwhile, 6.4 GW of solar projects were auctioned in Q1 2025, a 39% drop from the previous quarter and a 74% YoY decline.

Sanjay emphasized that auction activity and tender issuance will likely remain muted in the coming quarters. Developers and investors are hesitant to move forward with new bids due to policy uncertainty around the ISTS extension, lack of transmission infrastructure, and concerns about module availability.

Mercom’s Q1 2025 India Solar Market Update report is 84 pages long and covers all facets of India’s solar market. For the complete report, visit:  https://www.mercomindia.com/product/q1-2025-india-solar-market-update