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India Solar Rooftop Map 2017 

India reaches 1.4 GW of rooftop solar capacity, 678 MW of new capacity addition in FY2016-17

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BRIDGE TO INDIA has released its latest edition of the India Solar Rooftop Map report. As per the report, India added 678 MW of rooftop solar capacity in FY 2016-17, growing at 81% Y-o-Y. Total installed rooftop solar capacity reached 1.4 GW as of March 2017. Strong market fundamentals including falling costs and improving debt financing mean that the market will continue strong growth trajectory for many years to come.

  • Commercial and industrial customers (C&I) remains the biggest market segment as economic viability is most pronounced for such customers;
  • OPEX model has been gaining market share, doubling from 12% in FY 2014-15 to 24% last year and large public sector procurement programs will drive further growth in this market in the next few years;
  • Yearly capacity addition is expected to scale up to over 2 GW by 2019 and over 3 GW by 2020 presenting attractive growth opportunities for all market participants;

With 65% of total installed capacity, C&I remains the biggest market segment. These consumers account for more than 50% of India’s total power demand and make savings of up to 50% through rooftop solar systems as their grid tariffs are typically between INR 7-10 (US₵ 11-16)/ kWh. Public sector segment is also expected to show robust growth in the coming years because of a strong government push combined with 25-30% capital subsidy. In contrast, the residential segment is expected to grow relatively slowly because of poor economic viability and lack of financing solutions.

OPEX (or BOOT) business model, where a third-party investor owns and builds the system under a long-term PPA with the site occupant, saw new capacity addition of 162 MW in FY 2016-17, accounting for 24% of total market (up from 12% in FY 2014-15 and 19% in FY 2015-16). This market is fairly consolidated as access to capital remains tight and on-the-ground execution is challenging. Top five developers account for over 60% market share – CleanMax Solar (24%), Cleantech Solar (12%), Azure Power (11%), Amplus Solar (8%) and Rattan India (5%). Going forward, we believe that this model will continue to grow but will be increasingly driven by tender-based public sector projects.

As seen previously, EPC for rooftop solar continues to be highly fragmented with over 1,000 registered installers and 35 largest players accounting for less than 35% market share. Only three companies have more than 2% market share – Tata Power Solar (6.4%), Sure Energy (2.5%) and Fourth Partner (2.2%).

In the inverter market, just two companies account for over 60% market share –  Delta Electronics (36%) and SMA (including Zever Solar, 25%). ABB, KACO and Fronius are other noteworthy suppliers with about 5-6% market share each. An increasing market share for ABB and entry of companies such as SolarEdge and Huawei may result in minor changes in the leaderboard in future.

Overall, we believe that rooftop solar market in India is beginning to realize its potential. Annual market size greater than 1 GW in the current year will be an important milestone for the market. We expect India to build a total rooftop solar capacity of 13.2 GW by 2021.

FULL STORY

Two months ago, we wrote about how Uttar Pradesh (UP) could be the dark horse for solar power demand in the country. Since then, the state has announced a 750 MW tender with Solar Energy Corporation of India (SECI) in Bhadla and a new solar policy to build 10.7 GW of solar capacity by 2022. But UP can be a tough place to do business as proven yet again by the state renewable nodal agency, UP New & Renewable Energy Development Agency (UPNEDA), asking developers to reduce tariffs for a 215 MW state tender closed in 2015. UPNEDA claims to be acting on behest of the state electricity regulator (UPERC), which is apparently refusing to approve power procurement at tariffs ranging between INR 7.02 – 8.60/kWh even though the benchmark regulated tariff for the tender was INR 9.33/kWh.

  • Many project developers are already wary of entering UP and the state’s move to renegotiate tariffs after signing PPA’s will further damage its credibility;
  • It makes no sense for UP to renegotiate tariffs for a mere 165 MW of capacity when it wants to add more than 10 GW of solar capacity in the next 5 years;
  • Such unilateral, post-facto moves to renegotiate tariffs detract from the Indian government’s ambitious plans and need to attract more private capital in the sector;

Only 130 MW of projects have been completed under this UP tender so far and several projects have been granted ad-hoc extension. UPNEDA may feel that it is justified in seeking lower tariffs when capex costs/ tariffs having been falling across the sector. But such a move is short-sighted as the harm to the state’s credibility and the negative impact of this step on future tenders will far outweigh the benefit of any tariff reduction.

Project developers already attach a very high risk premium to UP. The state is notorious for poor law and order situation and has a low ‘Ease of doing business’ ranking, 14th among Indian states. Our recent report, Assessment of utility scale tender results in India, showed that UP tariffs have been higher than other state tariffs by up to 50% after adjustment for radiation, timing and other factors.

But UP is also the most populous state in India with a population of 220 million (17% of India’s population) and per capita electricity consumption of only 532 kWh as against 1,537 kWh for Gujarat and 1,192 kWh for Maharashtra. The new BJP government has a huge economic opportunity to turn around the state’s economy by exploiting cheap renewable power and reforming the local power transmission and distribution system. It has indeed made reliable power supply as one of its core policies. UP has already cancelled over 7 GW of planned thermal projects and is believed to be planning to procure another 1,500 MW of solar power in the near future. In such a scenario, it makes no sense for the state to renegotiate tariffs for a mere 165 MW of capacity.

Moreover, any unilateral, post-facto move by any state to renegotiate tariffs detracts from the overall national growth story and Indian government’s attempts to attract more private capital in energy and infrastructure sector. The national and state governments, together with the regulators, need to clamp down on such regressive short-term measures.

FULL STORY

Three days into implementation of the Goods and Services Tax (GST), Indian solar industry continues to face uncertainty regarding GST rates. We know that GST will be applied to solar modules at a concessional rate of 5%. Central government officials including the Minister for Power, Piyush Goyal, have confirmed on multiple occasions that the 5% concessional rate will extend to all equipment for solar power generating plants. But operational clarity for these other capital goods used in solar projects is lacking in practice.

  • There is confusion in the market on how to avail of the concessional 5% GST rate when many of the same components are taxed at higher rates for use in other industries;
  • MNRE is still working to evolve a mechanism in consultation with Ministry of Finance to try and resolve this issue;
  • Net increase in project EPC costs is expected to be around 6% if the issue is not resolved;

We spoke to four inverter suppliers today – two of them said that the GST rate for inverters is 18%, one said that it is 5% and another one said that that it is 5% for end-users and 18% for EPC companies.

The reason for the rate confusion is that it is not clear how to avail of the concessional 5% GST rate – as defined and intended under chapter 84 of the rate schedule for goods – when many of the same components are taxed at higher rates for use in other industries. For example, transformers used for solar projects are intended to be taxed at 5% but they are taxed at 18% for other applications. In the absence of any specific notification for solar projects, GST rate varies from 18% for capital goods such as inverters and module mounting structures to 28% for cables and batteries.

We understand that MNRE is still working to evolve a mechanism in consultation with Ministry of Finance to try and resolve this issue. Almost 10 GW of India’s pipeline solar capacity is impacted by increase in indirect tax rates under GST and lack of clarity adds to the complexity. If all capital goods for solar projects are taxed at 5% rate, we expect overall increase in EPC cost at around 3%. If, however, only modules are taxed at 5% and other capital goods are taxed at rates between 18-28%, the net increase in EPC cost is expected to be around 6%.

With global solar module prices firming up this quarter due to extension of solar FIT deadline in China, GST comes at an unfavorable time for the sector. We expect project delays and cannot rule out the risk of litigation between project developers and DISCOMs over sharing of the additional cost burden. Adverse impact will also be felt in the rooftop solar market, where we expect market activity to slow down in the near future.

FULL STORY

India imported 5.7 GW or about 89% of its total solar module requirement in FY 2016-17. Value of these imports is estimated at USD 3 billion, equivalent to 2.8% of the country’s total merchandise trade deficit. An increasing reliance on imports in a growing and strategically important sector is creating various stress points and raises the risk of a knee-jerk policy reaction by the government which has, until now, been unable to effectively support domestic manufacturing.

  • China dominates global manufacturing and is trying to secure control on the technology upgradation roadmap for solar PV;
  • Over reliance on a single country puts Indian solar sector at a risk of disruption in global supply chain and change in Chinese government policy;
  • The Indian government needs to consider long-term implications for the sector and draw up a well thought out plan for domestic manufacturing instead of introducing short-term support measures;

China has been pumping in billions of dollars in subsidies and other support measures to scale up solar PV manufacturing and dominate global market. The result is massive increase in manufacturing capacity from 23 GW in 2013 to over 70 GW today despite steep fall in prices. It has also been strategically providing support for new technologies through its ‘Top Runner’ program to encourage the industry to migrate to higher-efficiency products and secure control on technology upgradation roadmap for solar PV.

India couldn’t match China’s financial commitment to the sector but provided some breathing room to local manufacturers through Domestic Content Requirement (DCR) and also toyed briefly with anti-dumping duties. However, such protectionist measures have not helped local manufacturing anywhere in the world and share of imports in India has continued to go up from 74% in 2014-15 to 89% in the last year. Notwithstanding various high profile announcements of new manufacturing capacity creation, the only notable player to do so in the last two years has been Adani, which has also deferred its vertical integration plans.

The Indian government’s overriding priority in the sector, so far, has been increasing generation capacity and lowering tariffs. That focus has hurt the prospects of domestic manufacturers who are unable to compete with Chinese imports and have now filed a new anti-dumping duty petition. With cost of solar power crashing to INR 2.44/kWh, there is a risk that the government may be tempted into a knee-jerk decision causing confusion in the market.

We have consistently argued that protectionism will not solve the problems of Indian manufacturers. But ever-increasing share of imports for solar modules is a concern when India plans to meet a significant share of its power requirement from solar and a huge majority of modules are imported from a single country. The entire sector is exposed to the risk of a potential disruption in global supply chain and/or change in international political, trade or economic environment. We have seen how changes related to Indonesian coal production have severely affected some Indian thermal IPPs introducing a series of litigation and regulatory uncertainty.

Given the multi-faceted implications for project developers, investors, DISCOMs and other stakeholders, we need a larger debate on the role of domestic manufacturing in the sector. And instead of considering short-term response to this issue, the Indian government should consider long-term implications for the sector and send a clear policy signal to reduce uncertainty for all stakeholders.

FULL STORY

BRIDGE TO INDIA has released the March 2017 edition of India Solar Map. As per our project database, India installed 5.5 GW of utility scale solar capacity in the last fiscal year reaching total cumulative solar capacity of 12.5 GW by March 2017. Another 12 GW capacity has been allocated to developers and is in various stages of development.

– We expect southern states to continue to dominate the sector in the short-term as 53% of total pipeline is concentrated in Andhra Pradesh, Karnataka and Telangana;
– Adani remains the largest developer with a total portfolio exceeding 2 GW (780 MW commissioned and 1,250 MW pipeline);
– Market volumes are likely to expand by 45% in the upcoming year but we don’t anticipate any new entrant to gain a meaningful foothold as India remains an intensely competitive market;

Southern domination continues in the sector with Andhra Pradesh replacing Tamil Nadu at the top with a commissioned capacity of 1,962 MW. We expect the southern states to continue to dominate the sector for the next 12-18 months as 53% of total solar pipeline is concentrated in the Andhra Pradesh, Karnataka and Telangana.
Greenko, NTPC and ReNew Power are the top three developers on the basis of capacity commissioned during the year. Six project developers have built more than a gigawatt of portfolio in the Indian market including both commissioned and pipeline projects. Adani maintains its status as the largest developer with a total portfolio exceeding 2 GW (780 MW commissioned and 1,250 MW pipeline).

Trina Solar (25.7% market share), Hanwha (10.5%) and Risen (7.6%) are the top three module suppliers with all of them gaining significant market share over last year. Canadian Solar (7.4%) has slipped three places to fourth position. Domestic manufacturers’ combined market share fell to just 10.6% with none of them making it to the list of top 10 suppliers for the first time. With domestic content requirement (DCR) policy shelved, prospects for domestic manufacturers appear very bleak.

In the inverter market, ABB has retained its position as the top inverter supplier with 28.6% market share for the year. TMEIC, Hitachi and SMA are close behind with a market share of around 16% each. Despite its premium pricing, SMA gained market share, up from 11.4% last year, with a single large sale to Greenko.

Outsourced EPC business continues to contract as most large developers rely on in-house execution capability. For the first time ever, self-EPC accounts for over half of the capacity commissioned in the year. Sterling & Wilson was the only EPC company with over 500 MW of deployment (around 9% market share).

Market volumes are likely to expand by 45% as we expect India to add 8 GW in the upcoming year. But we don’t anticipate any new entrant to gain a meaningful foothold in the extremely competitive market.

FULL STORY

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