The Indian solar energy sector is experiencing a surge in growth, driven by a robust domestic market and strong demand from the Middle East. This growth is particularly evident in the Engineering, Procurement, and Construction (EPC) and Operations and Maintenance (O&M) sectors, where Indian companies are making significant strides. While US companies, notably SOLV Energy, continue to dominate the top rankings with substantial operational capacities, the rise of Indian firms is notable and accelerating.
Indian EPC firms are rapidly expanding their capacity, with a 18% increase in development between last year and this year. Larsen & Toubro and Sterling & Wilson are standout performers, ranking second and fifth, respectively, in operational capacity among EPC contractors. Larsen & Toubro, in particular, leads the EPC space with a substantial pipeline of 13.2GW of capacity across operating and under-development assets, and an operational portfolio of 70 projects. This growth is not limited to EPC; Indian solar PV capacity is almost on par with the US, solidifying India's position as the world's third-largest solar market.
The Middle East's high demand for new EPC work has opened doors for Indian companies like Larsen & Toubro, which has built more in Saudi Arabia than at home. This trend is further supported by the fact that Indian companies are becoming major exporters, with Larsen & Toubro's significant contributions in Saudi Arabia and Sterling & Wilson's work across the Gulf, Australia, and Africa. However, the distinction between EPCs and O&Ms that "build big" and those that "build often" is crucial. Indian companies are engaging in both types of projects, but recent growth is more pronounced in the large-scale segment.
The Indian solar PV market is characterized by a shift towards larger projects, with projects above 100MW accounting for around 70% of operating capacity. This growth is driven by frequent national and state tenders, particularly for Inter-State Transmission System (ISTS)-connected, round-the-clock hybrids paired with wind or batteries. The Solar Energy Corporation of India (SECI) launched a tender in June seeking 1.2GW of solar PV alongside 600MW/3.6GWh of battery energy storage systems (BESS), highlighting the increasing importance of batteries in the Indian renewable energy landscape.
In contrast, the Indian project development and independent power production (IPP) sectors are more domestically focused. Adani and NTPC, ranked seventh and eighth, respectively, are the only Indian companies in the top ten for project development capacity, and Adani is the sole Indian firm in the top ten of the IPP rankings. India's leading IPPs and developers, such as Adani, NTPC, ReNew, Greenko, and Tata Power, operate almost exclusively in India, with between 90% and 100% of their capacity in the country. This domestic focus has created a competitive environment, making it challenging for overseas developers to enter the market.
The Indian solar sector's growth is supported by regulatory frameworks like the Approved List of Modules and Manufacturers (ALMM), which encourages the use of domestically-manufactured components. This has further incentivized Indian solar companies to invest in the Indian solar sector. However, the market remains largely closed to Chinese participation, with only European firms breaking into the procurement market. As a result, some of the largest project development pipelines in the world are not being built in India, with Saudi Arabian firm ACWA Power leading the way.
In conclusion, the Indian solar energy sector is witnessing a remarkable growth trajectory, driven by a strong domestic market and Middle Eastern demand. Indian companies are making significant inroads in EPC and O&M, while the project development and IPP sectors are more domestically focused. The market's regulatory environment and competitive dynamics present both opportunities and challenges for Indian and international players alike. As the sector continues to evolve, the responsibility for maintaining strong growth rates will likely fall on the specialists already operating in the Indian solar sector.
