As 2020 ends with the pandemic still wreaking havoc globally, different segments of the solar power value chain have been affected and are increasingly seeing consolidation at various levels. These include utility-scale developers; engineering, procurement and construction (EPC) for rooftop solar and commercial and industrial (C&I) developers; module manufacturing companies; and inverter manufacturing companies.
According to a report by global clean energy communications and consulting firm Mercom, there are over 300 utility-scale developers in India that have operational projects of 5 MW or above. The top 10 companies accounted for 70 per cent of the new installed capacity and only 29 developers had projects of 100 MW or above. In 2018, the top 10 utility-scale solar photovoltaic (PV) project developers accounted for 60 per cent of the installed capacity, while in 2017, the top 10 utility-scale developers accounted for 46 per cent of all large-scale solar PV projects developed in India cumulatively. There were around 200 utility-scale project developers in the country with projects of at least 5 MW or more in operation in 2017, which grew to 300 in 2018 and remained at around 300 in 2019. Hence, it is clear that the utility-scale segment is going through a phase of rapid consolidation, with the top 10 developers increasing their market share in 2019 to 70 per cent from 46 per cent in 2018. The year 2020 witnessed the bids of the Solar Energy Corporation of India and the state governments being mopped up by these top 10 companies. There has been some participation by a few foreign developers, which were entering the Indian space for the first time. This may, over time, lead to further consolidation due to the lower cost of capital.
EPC for rooftop solar and C&I developers
At the end of 2019, the cumulative rooftop solar installations in the country stood at 4,365 MW, with 1,104 MW of rooftop projects being installed during the year. In 2019, the top 10 rooftop solar installers represented a 43 per cent market share. In 2018, the top 10 rooftop solar installers covered just 30 per cent of the installed capacity.
In 2020, there was a dramatic drop in installations due to local lockdowns, difficulty in the movement of labour and material as well project cancellations or postponements. With EPC activity at a low, many companies have downsized their teams and some of the smaller ones have shut shop. Hence, as the sector moves into 2021, consolidation is expected to increase further, with the top 10 developers taking up more than 50 per cent market share. Moreover, in terms of C&I RESCO developers, the market has seen the top five players continuing to expand their portfolios. There have been some acquisitions of smaller developers, which have further consolidated the market share of these developers.
Module manufacturing companies
In 2019, the top 10 module manufacturing companies had a cumulative market share of 62 per cent. In contrast, in 2018, the top five accounted for only 30 per cent market share. We do not expect this scenario to change in 2020 and 2021, but from 2022, we could see major changes in module manufacturing supplier names and market shares due to the increased focus on domestic manufacturing amidst India-China tensions.
Within the inverter space, central inverters have always been a consolidated space, with the top five companies accounting for over 80 per cent market share for the past couple of years. In the string inverter segment, the top five companies have reported over 70 per cent market share. However, there have been some acquisitions in this space with ABB selling its inverter business to FIMER and domestic household names such as Polycab and Havells trying to increase their market share. It remains to be seen whether the Indian household names can profitably chip away market share from their foreign counterparts.
Overall, the Indian solar market witnessed a slump on account of the Covid-19 pandemic as project installation suffered due to labour and equipment concerns. This hit the revenues and profit margins of stakeholders across the value chain, thereby leading to an increase in consolidation activity. This trend is likely to continue well into 2021 and beyond, at least till the market stabilises and smaller companies are able to capture a greater market share.