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AnalysisofSolarMarketThenewsourceofenergy!

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Analysis of Solar Market- The new source of energy !

About LatestPosts

Achira Banerji (Http://Ideasmakemarket.Com/Members/Achira_Banerji/)

A PGDM graduate from BIMM, Pune who is currently working with HCL Technologies in Chenn
Digital Marketing enthusiast; a Social Worker and Traveler by soul.
(http://ideasmakemarket.com/members/Achira_Banerji/)

Globally, the solar power industry has been growing rapidly in recent years. In 2010, an estimated total capacity of
17,000MWwasinstalledglobally.SolarradiationoverIndiais5000trillionKWH/yearinmostpartsofIndia,clear
sunnyweatherisexperienced250to300daysayear.Thecountryreceivesmorethan4kWh/m2/day.Majorstatesput

together then 979.4MWp is the total amount of energy derived in form of solar. Thus this puts India amongst the highes
receivingcountriesoftheworld.

FavorablepolicysupportfromthegovernmentismakingIndiaahotspotforsolargeneration.Governmentregulatesthesola

MNRE (Ministry of Renewable Energy) and financial assistance is provided by IREDA (Indian Renewable Energy Deve
Limited.

SolarpowerfromSPV(SolarPhotoVoltaic)systemandsolarconcentratingsystemisproducedinenvironmentalfriendlym

generateanywasteorpollution,andmeetstheenergyrequirementindomesticsectorindecentralizedmannerquiteefficiently

TheexhibitbelowcapturestheirestimatesaboutsolarmarketinIndiawhichshowsthatthereisasteadygrowthinthes
201718.

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KeyDrivers:
Costreductionisachievementofeconomiesofscale,
Technologicaladvancements
Emergenceoflowcostmanufacturinglocations.

ThekeydriverofthegrowthofthissectoristheconceptofGridParity.Thisreferstothepointwhenthecostofthesolarpow
ofconventionalpower.Intheexhibitbelow,itshowsabandrepresentingsolarrooftopcosts.Thebandvariationsignifies

thedifferencebetweencostandprice(includesmarginsacrossthevaluechain).Itisexpectedthatthesolartarifftolieanyw
banddependingonthebargainingpowerofthedevelopers.AndIndiawillreachitsgridparityby201920.

Consumercategories:
Domestic
Agricultural

Solarpoweredequipmentismoreenvironmentallyfriendlyandeconomicalinitsoperationcomparedtoequipmentspower

combustionengine(ICE)ornuclearpower.ForirrigationanddrinkingwatersolarPVwaterpumpingsystemsareusedinI

pumpingsystemworksonpowergeneratedusingsolarphotovoltaicsystem.Thesolarenergyisconvertedintoelectricity
voltaicarray.

The residential consumer category contributes to about 29 percent of the total Indian Power requirement this is expected

percentby202122,accordingtoKPMGreport.Itisexpectedthathighendresidentialconsumerswillbeproactiveinadopt

given their higher power tariffs. A large number of these consumers are likely to start adopting solar power from 20

governmentinvolvementwillberequiredinencouragingnonhighendresidentialandagricultureconsumerstousesolarpow
SolarMarketSegment:
GridConnectedSolarPotential
OffGridConnectedSolarApplicationPotential
SolarWaterHeater(SWH)

Grid Connected Solar Potential includes Residential Rooftops and Utility Scale Solar power (CSP and PV). And Offgrid
ApplicationPotentialincludesSolarPoweredAgriculturalPumpsetsandSolarpoweredTelecomtowers.

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In the offgrid space, solar power is already cost competitive with alternatives in certain applications. For example, teleco

attractivemarket(http://ideasmakemarket.com/iiftinterviewexperienceayushsethia)forsolarPVinstallations.AndSola
(SWH)applicationscouldbeusedinresidential,commercialaswellasindustrialsectors

Thewholeindustrycanbeanalyzedusing:
PESTAnalysisand
PotersFiveForceModel

The industry can be analyzed into the following four categories using PEST analysis which is Political, Econom
Technological.

Political:

ThegovernmenthashugepresenceintheSolarEnergymarket.ItregulatesthemarketthroughMNRE(MinistryofRenew

financial assistance is provided by IREDA (Indian Renewable Energy Development Agency Limited). One of the eight mi

NAPCCistheJawarlalNehruNationalSolarMission(JNNSM)whichwaslaunchedinlate2009.Themissiontargets22,0
powergeneration.

Therearetwomajorfinancingmechanismsprovidedbygovernment,i.e.
Debt:ProjectFinance
Equity:PrivateEquityandVentureCapital.

GeneraleligibilitycriteriaforSolarenergyloans:
Applicants:
Public,PrivateLimitedCompanies,NBFCsandregisteredsocieties.
Individuals,ProprietaryandPartnershipfirms(withapplicableconditions)

StateElectricityBoardsandeligibletoborrowloansfromPowerFinanceCorporation(PFC)orRuralElectrificationCorporati
Governmentalsoprovides30%subsidyforinstallationofSolarPanelathome.

Economical:
IntherecentroundofreverseauctioningprocessforthesolarprojectsundertheNationalSolarMission,thepricediscovery

was in the range of INR 10.49/kWh to INR 12.24/kWh for solarthermal and between INR 10.59/ kWh to INR 12.76/ k
projects.

Thebudgetshasalsoencouragedprivatesolarcompaniesbyreducingcustomsdutyonsolarpanelsby5%andexemptingexc

photovoltaicpanels.ThegovernmenthasinitiatedaRenewableEnergyCertificate(REC)scheme,whichisdesignedtodri
lowcarbonenergyprojects.
Social:

AccordingtotheKPMGreport,thegridparityfortheconsumercategorydomesticandagriculturein201920,basedonspe

specificcosteconomics,theadoptionforsolarislikelytohappenearlier.Certainstateswillreachthispointearlier.Forexam

Rajasthan,GujaratandTamilNaduareexpectedtoreachthispointearliernotonlybecausetheyhavehighersolarinsulation

Technological:

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Itisexpectedthatthesolarpricestodeclineattherateof57percentperannumoverthenextdecade,thisisbecauseglob
SolarPVsystemshavedroppedsignificantly

Thesolartechnologyhasoligopolycharacteristicsdominatedbyasmallnumberofplayers.

TheSolarmarketcanbebestexplainedwiththeMichaelPortersFiveForceModel,whichcanbeexplainedwiththefollowin

SuppliersPower:

Solar technology has oligopoly characteristics dominated by a small number of players, but then with government interve

awarenessthepriceofsolarenergyiscomingdown.Thetimetakentoreachgridpartywouldalsodependonthebargain
developers.Degreeofinfluenceexertedovertheindustrybythesuppliers:
Productisuniqueandscarce,
SuppliersaremoreconcentratedintheEuropeanmarketbecauseofbettertechnology.
Highswitchingcostsforthefirmintheindustryishigh.

21

TheSuppliersofthesolarenergysuppliesalsotoomanyindustrieslikerural,agriculture,hospitals,hotels,etc.
9

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Thereisnosubstituteproductforsolar.
Theproductiscriticalforthecompany.
2

BuyersPower:

Theindustrysmajorpowerlieswithinthebuyersside.Sincetheawarenessinthemarketisverylow,onlyasmallpartofres

i.e. high end residential consumers is the proactive group. But for the nonhigh end residential consumers governme
important.Degreeofinfluenceexertedovertheindustrybythebuyers:
Forcingdowntheprices,sincetheconsumersarepricesensitive
Consumersaredemandingintermsofvalueadded,higherquality
Lowswitchingcostsforthebuyers
Substituteproductsareavailable
Threatofnewentrance:

Thethreatofnewentranceisnotthatprominentnowbutitwillbehighassoonasgridparityisreached.Sincethesolarp

downandthesupportfromthegovernmentwillbethemajordriverinthisregard.Nowthesegmenthashighentrybarrierbut

barriersothesegmentisattractive.Theexitbarrierisexpectedtogodownafterthegridparityisreached.Degreeofinfluenc
industrybythethreatofnewentrance,are:
Lowscaleofeconomiesbeforethegridparity.
Thetechnologyisnotprotected.
Productisnotdifferentiated.
Governmentpolicymakestheentrybarrierlowerbutafterthegridparityitisexpectedtogodown.
Themajorbarriertoentryisthedistributionchannel.

Threatofsubstituteproduct:Anotherprominentpowerintheindustryisthethreatofsubstitute.Thesubstitutei.e.conv
ofenergyarealreadypresentinthemarket(http://ideasmakemarket.com/ximborganisestalkonagriinputmarketing)
bythem.Degreeofinfluenceexertedovertheindustrybythethreatofsubstituteproduct,are:
Therearemanysubstituteproductsavailable
Customersswitchingcostislowastheycaneasilyswitchovertothemastherepriceisless.

IndustryRivalry:Theintensityofrivalryfromthedirectcompetitioni.e.companiesdealinginsolarequipment,islowbut
competition i.e. companies dealing in conventional residential pump it is very high. Degree of influence exerted over th
industryrivalry,are:
Marketiscrowdedwithindirectcompetitionfromindirectcompetitionbutwithsomedirectcompetition.
Switchingcostfortheconsumersfortheconventionalmarketislow.

Some prominent companies in the solar market(http://ideasmakemarket.com/achecklistforemployeeretention), whose

muchhigher,likeTata,Relaince,Mahindra,BHEL,MoserBaer,etc.

Solarpowerhastremendouspotentialtomeetalmost7percentofourpowerneedsby2022,mitigate2.6percentofourcarb

thatyearandsaveover71MTPAofimportedcoalinthatyear(equaltoUSD5.5bnofimports).Theimperativeforactionto

therefore is the case for persistence and consistency on part of the Government. For the industry, this represents a signif

opportunity.InvestmentopportunitiesacrossthevaluechainfrommanufacturingtoEPCtoprojectdevelopmentoverthenext

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