Dated 08th January 2013
Write up on Solar Industry in India:
In the present day scenario of the Off-Grid lighting in Indian household, over 90% of it is done by utilizing Kerosene. So there is a huge scope for solar manufacturers with global foot prints to tap the huge potential of the Indian market. It is estimated that roughly 2 to 3 million solar lanterns and 1 million SHS have been sold to date in India.
Assuming that there are 75 million off-grid households in India, the estimated penetration of solar lanterns and SHS is extremely low at approx. 4-5%. If the under-electrified households were also taken into account, these penetration levels would decrease further. There are no clear estimates available on the annual market size for solar lanterns and SHS in India. A recent survey of solar off-grid lighting companies by The Energy and Resources Institute (TERI) found that 16 survey respondents sold approx. 270,000 lanterns in 2010. However, this may not be representative of total lantern sales in India, as sales data of enterprises such as D Light and Reliance are not reflected in the survey. In the absence of other sales data sources and based on our primary research, we estimate that the current annual
market size for solar lanterns could range between 300,000 and 500,000 units per annum. Similarly, we estimate that
annual sales of SHS could be approx. 100,000.
A survey Conducted by Intellecap in 2009 of rural low-income Indian households that owned solar lanterns (costing
USD 15-20) revealed that the provision of access to finance had positively influenced their purchase decision.
The following figure depicts the typical price range of these products in Asia. The pricing range for lanterns is very broad (e.g. 20-70 USD for basic lanterns) whereas for SHSs, pricing is in a tighter range (with the exception of Philippines).
The market for providing finance for customers of solar off-grid lighting products remains unaddressed in most of the focus countries. Commercial banks as well as microfinance institutions shy away from extending credit, citing high transactional and operational costs in the face of low demand for solar lighting products and remote location of most target customers. Additionally, given the low-income status of such consumers, they also see a high default risk, part of it stemming from their distrust of the product quality – if it dies before the loan terms, chances of recovery decrease. Product quality is a key factor for ensuring the viability of the off-grid lighting market across
All the above mentioned issues are more acute in solar Moreover, providing after-sales service is a bigger challenge in the case of lanterns compared to SHS as lanterns are low value products and need scale for it to be viable for the
companies selling them. In light of these difficulties in working with individual customers and products, some banks and MFIs are interested in supporting models of off-grid lighting that aggregate customers. This could be through providing micro-entrepreneurs with financial support to start their own solar lantern charging stations or providing small dealers with credit to buy products from companies for distribution to customers on direct sale or flexible
repayment terms. An example of this financing support can be seen in the pilot being run by Yes Bank, an Indian bank, to provide microfinance loans to “Lighting a Billion Lives (LaBL)” entrepreneurs with the disbursement and on-ground monitoring to be handled by a partner MFI.
Innovative models are emerging across the globe to overcome barriers in accessing finance
Model 1: Fee-for-service / rental model for solar lanterns
Model 2: ‘Pay-as-you-go’- loan repayment over mobile:
Model 3: Acquisition of solar off-grid lighting products through remittances:
Model 4: Financing SHS through monthly payroll deductions:
Model 5: Increase affordability through modular design:
Off-Grid Lighting Scope in India:
India faces the most acute challenge of electricity access in the world with 75 million of its 226 million households
off the grid, the largest such demographic globally.
In addition, it has a very high population that faces under electrification (assuming that households consuming
less than 50 kWh of electricity per month are under-electrified) .
Source: Census 2001, World Energy Council, Overview of Indian Energy by Prayas Energy Group.
Of the off-grid population, a vast majority (94% or 71 million households) is spread across rural India where
the electrification rate dips to 52.5%.
Market led by government efforts until recently
Until 2007-08, the market in India was led by semi-commercial and non-commercial approaches. These were driven by the Ministry of New and Renewable Energy (MNRE), which is responsible for promoting PV systems in the country and oversees programs for promoting solar lanterns and SHS. These programmes did not kick start the commercial market as had been hoped with a still limited penetration rate of solar products.
There are few promotional programmes taken up by the Govt. of India to promote rural Off-grid lighting like the JNNSM (Jawaharlal Nehru National Solar Mission), MNRE Solar Lantern & SHS programme, RVSLP (Remote village Solar Lighting Programme.
At the moment the Solar supply scenario is fragmented in India. There are no clear Industry leaders in the space. MNCs like Philips, Hitachi & Schneider have recently entered the Indian solar market. Still a very larger market is un tapped and there is a very huge potential for other manufacturers. Currently, Tata BP Solar is the largest player in the SHS category with approximately 25-30% market share.
There is an adequate manufacturing capacity of PV components in India. There are 9 companies producing
solar cells and close to 20 companies producing solar panels. Annual growth of domestic production of panels
has been 20-25% the last few years, with one-third used for solar off-grid lighting. However, this manufacturing capacity is currently under-utilized with most solar manufacturers operating at only 40% capacity. Most solar off-grid lighting companies undertake product design in-house and procure the key components such as panels, batteries, controllers and housing domestically and only import LEDs. Such companies also assemble locally. Smaller companies do not assemble the products, instead importing the products in an assembled or in a CKD/SKD form, mainly from China and Taiwan.
There are multiple distribution model adopted by Solar manufacturers in India. They are done either through Institutional partnerships or, Company owned branches or, Micro-franchising or, traditional distribution channels.
Finance is a major concern for the Off-grid lighting system in India. The JNNSM has tried to push the consumer financing for SHS, however there is a concern on the adequacy of the finance. Companies are now adopting innovative ways like partnering with MFIs and Regional rural banks. Few companies are also eyeing the Venture Capital (VC) route in attracting equity. There is a scope for companies to explore the Carbon –financing mechanism too.
With approximately 400 million people off the grid and many more under-electrified, India offers a tremendous
potential for the solar off-grid lighting market, given the minimal market penetration. Off-grid lighting products
are affordable over a period of time despite the significant subsidy given for kerosene by the government. Other
positive factors are the presence of local manufacturing capacities, favorable regulatory scenario, new financing
models that are being piloted and the transition of the market from a ‘subsidy driven’ to a ‘strong private sector
led’ market. To realize the market potential, companies need to meticulously formulate their distribution and after-sales service strategies and collaborate with partners on ground to deliver the marketing messages in a localized manner.
In the near future many RFQ’s/Tenders are slated to be floated by various state governments in India. The size of each is going to be of an approx. value of million USD 100 to 150 each , especially for utility products such as solar lantern etc. It’s an opportunity for established manufacturer with global footprint, to tap the enormous off grid energy market of India. For all the upcoming government RFQ’s/Tenders, we can enter into a strategic partnership. Interested manufacturers with a global footprint can contact us for further assistance preferably within 7 days from the date of publication of this blog. Serious and Urgent responses on this matter is highly solicited.
SOURCE: GOVERNMENT OF INDIA