The United States is taking action at the WTO over the domestic content requirements in India's program, which aims to ease chronic energy shortages in Asia's third-largest economy.
US Trade Representative Michael Froman has said making Indian solar developers use locally made equipment discriminates against U.S. producers, in breach of WTO rules, and could hinder the spread of solar power globally by making equipment more expensive.
But green groups including the Sierra Club, Greenpeace USA and Friends of the Earth U.S. said supporting the U.S. industry should not come at the expense of India's push to cut fossil fuels and build a viable domestic renewables industry, which would in turn help global efforts to tackle climate change.
"The U.S. should not compromise the long-term growth of the solar market just so that it can achieve limited near-term gain," a coalition of 15 groups wrote in a letter to Froman.
The United States, which says that more competition in solar power will lead to higher quality products, plans to request a dispute settlement panel at the WTO on Friday, the next formal step in a dispute process which can lead to trade sanctions.
India, for its part, is investigating U.S. policies supporting solar panel makers, a signal of possible retaliation should the dispute escalate.