2.2 Indian Solar Industry

For a tropical country like India which receives ample sunshine all round the year and has an ever increasing demand for energy to fuel its industrial and socio-economic development, solar power presents immense potential to slake its energy thirst in way that is environmentally benign. The industry has witnessed rapid growth over the past few years and future prospects are bright. The country's geographical location, large population, and government support have created just the right set of circumstances for a fast emerging solar energy market attractive to both local and global investors in the industry.

Demand for solar products has been rapidly rising for the recent years, especially in rural areas, and is expected to continue growing during the next few years. Solar street lighting systems, home lighting systems, cookers, pumps and solar water heating systems are the most popular applications in India. The solar mission with its ambitious targets has drawn the attention of local and global industrial giants to the solar power generation business.

2.2.1 Market for Solar Hot Water Systems

The global market of non-conventional energy resources has witnessed a rise in demand of solar water heaters though, compared to the People's Republic of China (PRC), the demand for solar water heaters in India is still fairly low. Nevertheless, the market in India is small but growing rapidly with both residential as well as industrial consumers showing interest in the product.

While the history of research in solar water heaters and pilot-demonstration goes back to 1960s, the first serious attempt to deploy the technology were made with the formation of Department of Non-Conventional Energy Sources (DNES) in 1982. The total installed collector area increased from 119 thousand square meters in 1989 to 525 thousand square meters in 2001, and to estimated 4.51 million square meters by end of the year 2010-11.1 The growth in installed solar water heater area is shown in Figure 2.2.

Figure 2.2 Cumulative Installations of Solar Water Heaters in India (up to 2010)

Source: http://mnre.gov.in/file-manager/UserFiles/Year_wise_installations_swhs.pdf, last accessed on 25 August 2012

The popularity of solar water heaters increased in the country in the mid-1990s and sales showed an annual growth rate of 8% between 1995 and 2000 with over 80% of the demand arising from the industrial and commercial sectors. Between 2001 and 2004, the off-take of solar water heaters expanded at an annual rate of 20.6% which further increased to 24% in the period 2004–2008. Starting from 2001, the number of residential users of these devices increased significantly. However, the solar water heater consumption in India is disappointingly low as compared to the other countries. As per the Renewables 2012 Global Status Report, by the year 2010, 64.8% of the total solar water heater capacity was utilized by PRC. India's share in solar water heating capacity use was only 1.5%.2

As per the Renewables 2009 Global States Report, 80% of the total sales of solar water heaters in the year were made to the residential consumers. The hotel owners had the share of 6% in the total sales of solar water heaters. Around 6% of these devices were sold to the industrial consumers and about 3% to the hospitals.3 This demand trend can be explained with the help of the following reasons:

  • Growth in new urban housing; rising disposable income; increased propensity for consumer durables
  • Arrival of the evacuated tube collector (ETC) technology and improvements in supply chain
  • Energy price hike
  • Policy initiatives

There are two solar water heating technologies in vogue; flat plate collector and the ETC; the latter has flourished on the strength of glass tubes imported from PRC. There are 113 approved Indian producers of solar water heaters with the market share of the largest player hovering below 15%.4 The producers do not have nation-wide brand equity and their dealer network is also limited. The manufacturing is concentrated largely in southern India with some presence in Maharashtra. Barring ETC, there has not been any major product/technology breakthrough in last two decades.

In the residential sector, there are 0.7 million solar water heater user households, 65% of which are concentrated in Karnataka and Maharashtra. The system cost for a household varies from Rs 20,000 to Rs 60,000, depending on the size and standard. It is positioned as an electricity-saving consumer durable. ESCO5 or pay-per-use models have not been attempted in any significant way. There is overall satisfaction with the product experience though some concerns are being voiced over the after-sales support. The residential heaters are mainly used to heat bath water. The average size of the domestic installations that were surveyed is around 150 liters per day.

In the hotel sector, experience across regions and hotel/guest-house standards suggests that areas that demand hot water for more than 9 months in a year may be considered high demand areas while at the lower end are those that do so around 4 months a year. The hotel industry must generally provide for year-round demand for hot water and the rising cost of conventional power supports the case in favor of solar power heaters. Roof availability is not a significant barrier for hotels that have a capacity of more than 15 rooms but capital cost is and can be a prohibitive factor.

Compared to hotels, awareness/exposure levels are low amongst hospitals and hostels. Supply hour management/regulation is a key advantage for both these sectors, and roof availability is not a noticeable constraint.

The experience in industries is limited and scattered. Solar heaters may be used for heating boiler feed water in rice-mills, pulp and paper, tea-gardens, leather, and textile processing. Industries such as dairy, fertilizer, some subsets of textiles, as also industrial canteens which use oil-fired boilers are also prime candidates for solar heaters. In rural areas, households, dhabas, primary health-centers, hostels and village-industries (silk-reeling, textile-dyeing, puffed rice-making) are important markets for solar heaters. Major roadblocks to the popularization of solar heaters in rural areas lies in the high capital cost, common recourse to biomass, absence of piped water supply systems, roof design/strength and a non-existent supply chain.

The latest available figures on sectoral breakup of functional solar water heaters penetration are for the year 2009 from the MNRE report on solar water heaters in India-2010, which assumes the 85% of total solar water heaters installed as functional (Table 2.2).6

Table 2.2 Estimated Break-up—Functional SWH Installations till 2009

Source: Report on Solar Water Heaters in India: Market assessments studies and surveys for different sectors and demand segments, prepared by Greentech Knowledge Solutions (P) Ltd, New Delhi, submitted to Project Management Unit, Global Solar Water Heating Project, Ministry of New and Renewable Energy, January 2010

The report also gives some projections for potential of solar water heaters in India based on the historical trend, consideration of utilization of solar water heaters in new buildings and some supportive policies. This projection is given in Table2.3.

Table 2.3 SWH Potential under Realistic Scenario (cumulative million sq m)

Source: Report on Solar Water Heaters in India: Market assessments studies and surveys for different sectors and demand segments, prepared by Greentech Knowledge Solutions (P) Ltd, New Delhi, submitted to Project Management Unit, Global Solar Water Heating Project, Ministry of New and Renewable Energy, January 2010

Many states are promoting solar based applications in a big way through incentives as well as regulatory measures. As shown in Table 2.4, both, Tamil Nadu and Karnataka are among the top five states with excellent potential for the application of solar water heating systems.

Table 2.4 Top Five States in India

Note: Data pertains to cumulative SWH potential in million sq m. for 2022 under the realistic scenario

Source: Report on Solar Water Heaters in India: Market assessments studies and surveys for different sectors and demand segments, prepared by Greentech Knowledge Solutions (P) Ltd, New Delhi, submitted to Project Management Unit, Global Solar Water Heating Project, Ministry of New and Renewable Energy, January 2010

2.2.2 Solar PV Market

India ranked seventh worldwide in solar PV cell production and ninth in solar thermal power (non-electric) generation in 2009-10.7 The global PV market has experienced vibrant growth for more than a decade with an average annual growth rate of 40%. Almost 30 GW of new solar PV capacity came into operation worldwide in 2011, increasing the global total by 74% to almost 70 GW.8Figure 2.3 shows the global total installed capacity of PV for the past two decades.

In India too, rapid growth in being witnessed with the emergence of many private manufacturers of solar energy equipment.

Figure 2.3 Solar PV Total Global Capacity, 1995-2011

Source: Renewables 2012, Global Status Report, published by REN21, www.ren21.net

India is a new entrant in the market which is still pacing up fast. However, as on date the Indian solar PV manufacturing sector is much bigger than the country's total installed capacity. The installed capacity of solar power in India was estimated between 481.48 MW grid-connected and 81.01MW by end of 2012, whereas, the overall manufacturing capacity of solar PV modules is about 1250 MW, about twice the cumulative installed capacity.9 While a few participants such as Bharat Heavy Electricals Ltd and Bharat Electronics Ltd cater to the demand from government projects like remote electrification and so on, many other companies such as XL Telecom and Solar Semiconductor sell a major share of their products to export markets. Indian manufacturers have been exporting 70% of their cell capacity and 80% of their module production capacity.10 In the absence of clear policy to make the domestic market for solar PVs attractive, private companies have historically been more inclined to explore ex

port opportunities rather than catering to domestic needs in order to leverage the lucrative profts that large export orders bring in.

A value chain of Indian companies involved in the PV market is shown in the Figure 2.4. One of the mission objectives for India is to take a global leadership role in solar manufacturing (across the value chain) of leading edge solar technologies, and to target dedicated manufacturing capacities for poly silicon material of about 2 GW per annum capacity. The Ministry of New and Renewable Energy (MNRE) and Ministry of Industry are working together to chalk out a plan of action for the same.

India houses a sizeable industrial base which comprises nine manufacturers of solar cells and 19 manufacturers of PV modules. Additionally, 60 companies are engaged in the assembly and supply of solar PV systems. List of major players in solar PV industry in India is presented in Table 2.5.

Figure 2.4 Solar PV Value Chain in India

Source: Compiled by authors

Table 2.5 Indian Solar PV Manufacturing Companies

Note: Wp Wattspeak; SPV Solar photovoltaic; MWp Megawatts peak

Source: Compiled by authors

2.2.3 Concentrated Solar Thermal Power Market

In the medium term, India is expected to be one of the world's major CSP players, following USA and North Africa, as shown in Figure 2.5.

Figure 2.5 Production and Consumption of CSP Electricity by 2050

Source: International Energy Agency. 2010. Technology Road Map – Concentrated Solar Power. France: OECD/IEG

Several private sector players have expressed interest in the solar thermal space in India. These include India-based firms, international organizations, and joint-venture partnerships between Indian firms and global players.

In March 2009, India-based ACME Group signed a 1 GW licensing agreement with e-Solar for US$30 million to develop projects in India and thus received an equity stake in the US company. Then ACME signed a 50 MW PPA with BSES Delhi in January 2010, with commissioning planned for 2011. Other technology promoters, including Power Cube Pvt. Ltd. and Electrothermal India Ltd., are seeking CSP solutions that circumvent grid instability, primarily for industrial supply. The Italian consortium Solare XXI has announced a technology supply agreement with Entegra Ltd. of India for a 10 MW commercial plant in Rajasthan [Emerging Energy], and another 10 MW CSP power plant, also in Rajasthan. Suryachakra MSM Solar India Pvt Ltd is a joint venture company formed between Suryachakra Power and MAN Solar Millennium for transfer of CSP Technology to project developers in India. This joint venture aims to indigenize technology components and minimize import of critical components to achieve cost reductions. Given India's solar power potential of 5,000 trillion KWh per year, a favorable regulatory atmosphere, and the supply–demand gap, it is only natural that solar power will be one of the thrust areas of future Indian governments.

Indian and international players engaged in diversifying into solar power plant business are looking at business avenues as project promoters, equipment manufacturers and / or EPC contractors. A comprehensive list of stakeholders across the value chain has been provided in Figures 2.6 and 2.7.

International

Figure 2.6 Global Value Chain of Players in Concentrated Solar Power

Note: * Glass/Mirrors, # Receivers, Collectors, Turbines, € Cooling equip., ~ Others, + Engineering/consulting, Just engineering, Just construction Companies highlighted in bold have already established business in India.

Indian Organizations

Figure 2.7 Indian Value Chain of Players in Concentrated Solar Power

Note: The Indian players except R&D institutes are the ones who have shown interest in developing CSP portfolio. Some of them are actively considering project development, setting up manufacturing facilities etc

1 OPET-TERI & HECOPET: Status of Solar Thermal Technologies and Markets in India and Europe. 2002; http://mnre.gov.in/file-manager/UserFiles/Year_wise_installations_swhs.pdf; last accessed on 25 August 2012

2 Report published by the Renewable Energy Policy Network for the 21st Century,c

3 Report published by the Renewable Energy Policy Network of the 21st century, www.ren21.net

4Report on Solar water heaters in India: Market assessments studies and surveys for different sectors and demand segments, prepared by Greentech Knowledge Solutions (P) Ltd, New Delhi , submitted to Project Management Unit, Global Solar Water Heating Project, Ministry of New and Renewable Energy, January 2010

5 An energy service company (acronym: ESCO or ESCo) is a commercial business providing a broad range of comprehensive energy solutions as also innovative financing solutions for the implementation of energy savings projects, energy conservation, energy infrastructure outsourcing, power generation and energy supply, and risk management.

6 Footnote 4

7 MISSION 120 MW. Websol Energy Systems Limited Annual Report, 2009-10. Available at http://www.webelsolar.com/investors_relation/investors/annual_report_2009-10.pdf, last accessed on 25 August 2012

8Renewables 2012, Global Status Report, published by REN21, www.ren21.net

9 For an estimation of the capacity of solar power in India please see, Government of India. 2012. Annual Report 2011-12. New Delhi: Ministry of New and Renewable Energy. For overall manufacturing capacity of solar PV modules please refer to The India Solar Handbook, June 2012 edition by Bridge to India, bridgetoindia.com.

10The India Solar Handbook, June 2012 edition by Bridge to India, bridgetoindia.com.