Month: September 2016

Globally, top 10 inverter suppliers accounted for around 75% of shipments in 2015. In India, the market is even more concentrated as the top 10 suppliers accounted for over 85% of shipments. Despite this, there is intense price competition and churning in supplier landscape. Prices for central inverters have fallen by 17% in the last year to about US¢ 3/W for most suppliers. SMA and GE inverters, however, are still priced at a substantial premium.

Utility scale solar

The market for utility scale solar projects in India is dominated by central inverters – ‘the bigger, the better’ seems to be the mantra. While the most common offering until now has been 1 MW sized inverters, several companies have now started offering bigger inverters with capacity of 1.8 – 2.5 MW. These are all currently rated at 1,000 V but driven by an anticipated global shift towards 1,500 V inverters, most companies are planning to make their new range available in India. The delay in shifting to 1,500 V is largely because of the relatively higher price for compatible modules and balance of system which negates any advantage gained from higher efficiency and fewer installation components.

The central inverter market is dominated by European and Japanese suppliers such as ABB, Schneider, SMA, TMEIC and Hitachi respectively. Except SMA, all other companies are now assembling their inverters in India and are able to get some cost advantage through local sourcing and assembly. From a taxation point of view, assembling in India is actually at a slight disadvantage as compared to direct imports from China as there is currently a concessional duty of just 5.15% on import of fully assembled products. According the BRIDGE TO INDIA analysis, this duty disadvantage on local assembly can be up to 7% of the product cost. However, the anomaly in favour of imports should be removed after implementation of the Goods and Services Tax.

Chinese companies such as TBEA, Sungrow and Huawei and Delta Electronics from Taiwan have also been able to gain market share in recent years. While many of these companies offer both central and string inverters, Huawei is focussing only on string inverters.

The utility scale market in India is expected to grow at 5-8 GW annually going forward as compared to a little less than 2 GW last year. This should help both existing and new suppliers in increasing their business volumes.

Rooftop solar

Indian rooftop solar market is expected to add about 500 MW of new capacity this year. There are many local players competing in this market but we find that the top 10 suppliers still account for over 85% of the shipments. Delta Electronics is the clear market leader, followed by SMA and its Chinese subsidiary Zever Solar. European suppliers Kaco and Fronius Solar and some Indian names such as Su-Kam and Consul Neowatt are other names in the top 10 suppliers.

Pricing in the rooftop solar market varies widely between US¢ 7-17/W depending on order size, specifications and brand. Implementation of GST is likely to improve the cost competitiveness of imported inverters as it is expected to make pass through of taxes easier.

The rooftop solar market in India is expected to grow at an impressive 70-80% for the next few years and there is a much larger room for newer companies to capture market share in this segment. Brand perception, effective distribution and competitive pricing are likely to be the key success factors in this segment.

The World Trade Organisation (WTO) has rejected India’s final appeal and upheld its previous ruling against Domestic Content Requirement (DCR) provision for solar projects in India (refer). But India has already built a pipeline of around 1,800 MW of DCR projects as against operational cell manufacturing capacity of only about 600 MW. Demand from these projects should provide breathing room to the existing manufacturers and avoid any immediate repercussions.

• The Indian government has unnecessarily wasted time and money pursuing a protectionist policy and its repeal may in fact be helpful in the long-term;

• India already offers extremely attractive subsidies under M-SIPS and other such schemes but all such measures have failed to produce desired results because of the formidable challenges faced by manufacturers in India;

• India has a competitive advantage in manufacturing of solar inverters and balance of system components, the country should focus on becoming a leader in those areas;

BRIDGE TO INDIA has always maintained that investment in manufacturing cannot and should not be based on short-term protectionist measures such as DCR. The Indian government has unnecessarily wasted time and money pursuing a flawed policy. The ruling should compel it to create a more sustainable roadmap for a viable domestic manufacturing sector.

It is worth noting the challenges faced by manufacturing in India – poor infrastructure, high financing and energy costs, inflexible labour laws and unrelenting bureaucratic obstruction. To offset these, India already offers extremely attractive subsidies to manufacturers under the Modified Special Incentive Package Scheme (M-SIPS) and the Special Economic Zone (SEZ) policy. But these policies are extremely rigid and their poor implementation has failed to produce desired results.

Domestic manufacturers have therefore been seeking additional relief by way of assured production offtake, anti-dumping duties and/or production subsidies. In our view, these are all short-term measures which will do little to create a genuinely competitive manufacturing sector. The new solar manufacturing policy is proposing to provide direct subsidies to integrated ingot-wafer-cell-module manufacturers. This could be a somewhat plausible short term option if limited performance based incentives are provided to more efficient manufacturers.

However, in light of the economies of scale achieved by Chinese companies and supply glut facing the international solar equipment market (refer), investment in greenfield integrated manufacturing capacity is extremely risky in our view. In effect, there is unfortunately no easy solution to attracting large scale investments in solar manufacturing in India.

In our opinion, the government can continue to try and strategically support a few large scale manufacturing facilities. However, protecting small and uncompetitive facilities forever is not the best use of public finances. It is also worth noting that there is significant manufacturing capacity being created in other parts of the sector in India – primarily solar inverters, mounting structures and transmission systems – without any specific support. Companies such as TMEIC and Hitachi are even planning to use their Indian manufacturing units for export of solar inverters. Would it not be a better idea to first strengthen the country’s manufacturing in areas where we have some competitive advantage rather than trying to promote investments in an oversupplied sector where most large global companies are constantly stressed?

Solar equipment prices are crashing in China. Polysilicon prices have dropped 30% in a month (refer), wafer prices by 20% (refer) and similar reductions are seen across the value chain. Landed module prices in India have dropped by nearly 15% in the last six months and negotiations for deliveries in Q1-2017 are happening in the range of USD 0.36-0.38/ Wp. Analysts say that price reductions are likely to continue through September (refer). The primary cause is excess supply. International module manufacturing capacity is believed to have crossed over 100 GW. In contrast, global demand is estimated at 70 GW for 2016.

Supply glut is likely to continue for a year and possibly longer as China is unlikely to grow out of trouble this time

Smaller manufacturers and those that are unable to invest in newer technologies will struggle to survive

Indian project developers will see a major windfall but notwithstanding major government thrust on domestic manufacturing, the country will find it difficult to attract large investments in a technology driven industry that has seen two major global supply gluts in the past five years

BRIDGE TO INDIA published the 2016 edition of its India Solar Map last week. The report shows that India’s total installed solar capacity has grown by over 80% in the year ending June 2016 to reach 8.1 GW. Out of the 3.6 GW capacity added in this period, 75% has come from four southern states and Tamil Nadu now ranks number 1 for commissioned capacity. An additional 14,842 MW of projects are under development where auctions have already been completed. The majority (56%) of this pipeline is concentrated in the three southern states of Karnataka, Andhra Pradesh and Telangana.

Total commissioned plus pipeline capacity, split nearly 40:60 between central government and state government policy projects, has grown to 23 GW, +70% over last year

Despite growing market, project development space is getting more concentrated wherein top 15 developers have gained nearly 50% market share; most players have 2-4x more capacity under development than their commissioned capacity and their ability to scale up will be critically tested in the coming year

Amongst the equipment suppliers, top players include Canadian Solar and Trina Solar for modules and ABB, TMEIC and Hitachi for inverters

With 460 MW capacity commissioned in the last year, Adani ranks number 1 amongst project developers followed by Acme and Welspun. Going forward, Adani, Acme and ReNew are likely to continue to be dominant players with each of them having a pipeline of over 1 GW. Most large developers have 2-4x more capacity under development than their commissioned capacity. It will be interesting to see how many of them can successfully meet the financial and operational challenges to scale up as required. Interestingly, the list of top 10 developers is dominated by Indian corporates/ IPPs with First Solar and SunEdison the only international players. Strong concentration effect is also evident despite entry of many new players in the sector; more than 50% of total commissioned plus pipeline capacity is accounted for by top 15 developers.

Leading players based on capacity deployed in 12 months up to June 2016

Amongst module suppliers, Canadian Solar, Trina and First Solar take the first three spots. 7 out of top 10 module suppliers in India are now from China as against just 4 out of top 10 in the previous year. Big change is significant pick up in market share by new Chinese suppliers including JA Solar, GCL Poly, BYD, Talesun and Risen. These companies had a very marginal presence in the market previously but now have a combined market share of 22%.

ABB continues to dominate the inverter market with a commanding 35% market share. Japanese players, notably TMEIC and Hitachi, have also gained a significant market share. It is worth noting that all three companies are assembling their products within India. Chinese inverter suppliers such as TBEA, Sungrow and Huawei are also in the top 10 and becoming more aggressive in the market.

The role played by third party EPC players continues to diminish. 48% of the capacity commissioned in the last year (up from 31%) was executed by in-house EPC teams. This business is dominated by a mix of Indian corporates and specialist players with top spots held by Mahindra Susten, Sterling & Wilson and L&T. Gamesa is the only international EPC player in the top 10.

The Indian solar market is expected to continue to grow at a strong pace at least for the next couple of years. Most of the strain caused by aggressive bids has been eased by rapid reduction in module costs. Longer term, sustainable growth will depend on growth in national power demand and robustness of the transmission grid to cope with an increasing share of renewables.

The report contains lots of other vital information on state-wise and policy-wise progress of the Indian solar market along with tariff trends and performance of companies (download it here for free).

Rooftop solar market in India is expected to add new capacity of 700 MW in 2016 – 15% of total solar capacity addition this year – crossing 1 GW cumulative capacity by September and growing at a sizzling 300% over last year. Significant capacity is expected to be added in the commercial and industrial segment as commissioning before the end of this month will allow investors to claim 80% accelerated depreciation (AD). The Ministry of Finance has reduced depreciation rate under the AD policy to 40% from April 2017 but more importantly, it is not yet clear if the AD benefit will be available for solar projects after this date.

Rooftop solar in India has maintained a 10-12% share of the total solar capacity addition, which is much lower than other peer markets

Private sector, primarily commercial and industrial customers, are leading the demand growth but government sector is also looking very promising

MNRE and various state renewable agencies are finally beginning to address key market challenges helping to unlock the market potential