Building Scale

Solar inverter manufacturers step up their investments

With the growth in the Indian solar segment, there is an increased demand for inverters, one of the most essential components in balance of system. The cost of inverters has seen a decline in the past few years in tandem with the decrease in the cost of solar modules and the overall system capital cost due to high demand. The solar inverter manufacturing market in India is considerably more mature than that of other solar power components. Although domestic manufacturers constitute a small share of the market, domestic manufacturing is on the rise propelled by international players who have set up manufacturing units in the country to reap the benefits of a high demand-low supply solar scenario.

Manufacturing scenario

The inverter market is highly consolidated with the top five players accounting for 77 per cent of the total market share. These include ABB, SMA, Toshiba Mitsubishi-Electric Industrial Systems Corporation (TMEIC), Hitachi Hi-Rel and Sungrow.

According to BRIDGE TO INDIA, 7.5 GW of solar inverter capacity was added between October 2016 and September 2017. During the period, ABB emerged as the leader with 27 per cent of the total share, followed by SMA and TMEIC at 15.6 per cent and 15 per cent respectively. Hitachi Hi-Rel accounted for 12 per cent and Sungrow for 8 per cent of the total market.

Meanwhile, Delta Electronics India is the market leader for the rooftop segment followed by SMA and Zever Solar. Su-Kam and Consul Neowatt are some of the other notable Indian players.

ABB’s solar inverter manufacturing capacity currently stands at over 2 GW. It doubled its capacity from the earlier 1 GW by setting up a new facility in Bengaluru in September 2016. In the period October 2016 to September 2017, the company installed inverters for 2.015 GW of solar capacity. In August 2017, the company achieved a milestone of over 5 GW of cumulative solar inverter capacity in India.

Hitachi Hi-Rel has two manufacturing facilities, at Gandhinagar and Sanand, in Gujarat. The Sanand facility is modelled on Hitachi’s Omika Works, Japan. Over 900 MW of capacity in India has been installed with Hitachi’s solar inverters. The company provides life cycle service support for its inverters through a decentralised pan-Indian system. Its Gandhinagar facility is spread across 10,000 square metres and manufactures solar inverters, among other products. The Sanand facility is built on an area of 26,000 square metres, and manufactures frequency drives, and automation and control products.

Huawei currently accounts for 6 per cent of the total inverter market share in the country. The communication market leader established business in India in 1999, with the first research and development (R&D) centre in Bengaluru. Huawei earned its place among the top five inverter manufacturers in the world in 2014 and has maintained it since. The company’s share in the Indian market has increased significantly since last year, with the installation of over 500 MW of solar inverters.

Schneider Electric has been present in India for over five decades, having started with a joint venture with Tata in 1963. It opened a global manufacturing facility in Hyderabad in 2005. In the past 12 years, the company has seen aggressive growth with multiple acquisitions in the country. It has a production capacity of 2.5-2.7 GW; nearly 70 per cent of its products from the Bengaluru facility are exported. With an installed capacity of 350 MW, Schneider Electric’s share in the Indian solar inverter market is about 4.7 per cent. In February 2017, the company announced that it had powered about 2 GW of solar capacity in India through its inverters, transformers and other equipment.

Bonfiglioli recently set up an inverter manufacturing unit in Bengaluru, taking its overall manufacturing capacity in the country to 300 MW per year. This is the company’s second largest inverter manufacturing set-up after its manufacturing plant in Germany. In October 2016, the company announced plans to expand its Thirumudivakkam factory where a new facility will be built on a 140,000 square foot area, at an investment of around Rs 750 million. In June 2017, the company commenced operations at its Chakan facility in Pune, Maharashtra, spread across an area of 45,000 square feet, and built at an estimated Rs 100 million. Furthermore, TMEIC recently completed the construction of its motor factory in India. Built at a cost of 5 billion yen, it has the capability to roll out products from 150 kW to 23,000 kW. TMEIC had acquired this facility from AEG in 2014. The company has the second largest share in the Indian solar inverter market at 15.6 per cent, having supplied inverters of more than 1 GW of solar capacity, as of October 2017. As of August 2016, TMEIC was in the process of building the second inverter facility in Bengaluru.

Interestingly, the third largest inverter supplier in the country, SMA does not have a manufacturing facility here and imports all of its inverters. KACO New Energy, a Germany-based brand that has recently entered the Indian market, will also be operating on a similar model with no immediate plans to build inverter manufacturing capacity in the country.

The largest inverter supplier for the rooftop solar segment, Delta Electronics India, has three manufacturing facilities – Hosur, Rudrapur and Gurgaon – and two R&D centres in Gurgaon and Bengaluru. Its latest manufacturing facility in Hosur, Tamil Nadu, was inaugurated in April 2016.

Future plans

With another 80 GW of solar power capacity targeted to be installed by 2022, the demand for solar inverters is expected to rise rapidly. Moreover, the domestic inverter manufacturing market has received a boost with the introduction of the new tax regime. Earlier, the cost of assembling solar inverters in India was slightly more expensive than direct imports. However, with the new tax structure, the issues have been smoothened and the manufacturing capability in India is likely to improve as the demand for low-price domestic products increases.

Foreseeing the imminent rise in the demand for inverters, companies like ABB, Hitachi Hi-rel and Huawei have expanded their manufacturing capacity recently. Meanwhile, Delta Electronics India is looking to invest about $500 million in the next 10 years. A substantial part of the investment will be in its award-winning solar inverter category and in increasing its manufacturing capacity base. Schneider Electric too is looking at launching next-generation solar inverters as well as safety technology for grids, to be manufactured at Bengaluru and exported globally.

SMA is currently in the wait-and-watch mode for setting up manufacturing facilities in the country. At present, it utilises the localised distribution network to cater to the Indian market. TMEIC has plans to increase its overseas non-domestic production to 7 GW annually from the current inverter capacity of approximately 2 GW across it facilities.

Challenges

The manufacturing sector in India is beginning to show positive signs. This has impacted the solar inverter segment as well. The government’s Make in India initiative has given the solar manufacturing sector the much-needed push, but the policies are yet to translate into significant manufacturing capacity addition. Moreover, only a handful of Indian companies manufacture solar inverters at present, with a cumulative low capacity base. This is expected to improve in the near future as the demand for solar inverters increases and profit margins improve.

Outlook

The domestic solar inverter manufacturing market is likely to get a boost in the next few years as the country looks to meet its 100 GW of solar capacity addition target by 2022. It is therefore imperative that companies set up large manufacturing capacities to meet the upcoming demand. To this end, the government will have to promote domestic manufacturing and provide subsidies on capital equipment to ease the burden on manufacturers and lower the domestic product cost, thereby ensuring reasonable profit margins.

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