Shining Bright. India’s Solar Start Ups

When Prime Minister Narendra Modi launched the Start Up India movement in 2015 on August 15, perhaps even he wouldn’t have imagined the role startups were going to play in India’s clean energy transition. After all, the energy sector, with its tremendous policy overhang, large capital commitments, and the need for a long term  perspective hardly meets the conditions for a typical startup founder.

On the other hand, the sheer size of the sector, the growth expected for the next few decades, and the nature of the transition, involving the introduction of new technologies, a fresh approach and a sympathetic policy environment made its own case for startups too. Thankfully for India, enough founders saw the opportunity, and today we have a thriving startup ecosystem in the solar sector in particular. With many more business plans, dreams and ideas waiting on the sidelines to make an impact in the coming years.

Thus, even as some of the largest and most successful firms today like the Sumant Sinha led Renew Energy Global started life as startups with backing from blue blooded finance firms like Goldman Sachs, and is listed on NASDAQ today, other major players like Fourth Partner Energy, Or Cleanmax, with a clear proposition targeted at the C&I segment for solar, have also attracted strong funds backing from investors.

However, most startups have walked a tougher path to success eventually. Now, with a whole new level of opportunities linked to emerging opportunities in energy storage, green hydrogen, EV charging (backed by renewable energy) and more, startups are set to make an even bigger impact leading up to India’s ambitious 2030 goals and beyond.

For India’s solar energy sector, across the chain of generation, distribution and last mile work, hundreds of startups have taken birth. While the biggest numbers will come from rooftop solar installation firms, startups have found enough niche profitable opportunities.

That is one reason why senior executives at Amplus Solar, itself a startup launched in 2010, focused on the C&I segment before being acquired by Malaysia’s Petronas in 2019 simply stress that “Start-ups bring in disruption. They are a must for any industry. In the solar and RE industry, start-ups which support the entire value chain through innovative solutions are a must”.

Take the case of Oorja Development Solutions India, which operates as a  farming-as-a-service company in northern India, and provides solar powered irrigation, milling and cooling services to low-income customers in eastern Uttar Pradesh and Bihar. Dr. Clementine Chambon, CTO and co-founder of explains the firm’s raison d’etre-  “Since the company was founded in 2016, our objective at Oorja was to use clean energy as a catalyst to support rural livelihoods and combat climate change.”

For Oorja, solar won favour due to the dropping costs and ease of maintenance. Dr Chambon adds,  “Solar PV as a technology was most cost-effective and easy to operate and maintain compared to biomass, wind, micro-hydro, among other renewable energy sources. Solar PV is of course much cheaper and cleaner than diesel power, the main alternative for our customers who are smallholder farmers and petty traders reliant on fossil fuel for their energy needs.”

Simarpreet Singh, Director, Chandigarh-based Hartek Group- an EPC major, lends his opinion on why solar is the most lucrative opportunity for start-ups within the renewable sector, “The opportunities are in every sphere of the renewable sector. However, solar energy is most versatile and scalable and provides startups with maximum opportunities. The greatest challenge lies in exploring ways and means of reducing the initial set-up cost. It requires innovative thoughts on supply, manufacturing, O&M, design, etc. It is an emerging sector that has huge potential, which can become a household item like any consumer durable but that is only possible if we can accomplish miniaturisation while increasing capacity at the same time.”

Startups are known to sense the gaps in the market and innovate solutions to turn them into opportunities. Rajasthan-based Vareyn Solar is a classic case in point. The firm, which provides rooftop solar plant installations across the country, eyed an opportunity in the solar domain and chose to tread this path. Says Ishan Chaturvedi, Co Founder and Director of Vareyn Solar, “We deciphered the gap in the solar energy sector and we knew that we could provide better solutions for both individuals and companies of all scales.”

The Jawahar Lal Nehru National Solar Mission (JNNSM) of 2010, was a key catalyst for the firm. “We have always kept ourselves abreast of the current trends and technological advancements and with JNNSM, 2010 we realized that solar energy is something that resonates with both of us,” says Ishan,  sharing how he and Co-founder Shreesh Chaturvedi got interested.

“In 2012, we started working in this sector as consultants. 2015 is when we decided to take the company and solar energy sector to the next level and that is how Vareyn Solar was born.”

Yet another Founder, who started small and has found opportunities limitless in the sector is Deepak Pandey, CEO, Invergy India Pvt. Ltd., a year-old inverter and storage firm has plans for his own storage solutions too. For Pandey, it has been about leveraging his experience and exposure as a top module and inverter distributor to stake a bigger bet on the market. “ When we started off in the sector, it was the novelty, and the idea of producing something as essential as energy  directly that convinced me about the opportunity here. While costs were an issue, the entry of Chinese players had convinced us that costs would come down too, and luckily, they did,” he says.

On his expansion to own brand sales, he says, “As the younger part of the power sector, the renewable sector has obviously seeded many startups. Some of the biggest names across segments were small, or unheard of a decade back. However, the culture is spreading fast to the broader power sector, thanks to the structural shifts underway across generation, transmission and distribution today.” Pointing to the expanding opportunities, Pandey asserts that “energy today is a sector that offers vast scale, opportunities, and lower entry barriers. The whole sector is going through a period of change not seen in the previous 50 years at least, and that convinces me that opportunities are everywhere.” He has certainly put his money behind his words, seeking partnerships across the globe to find projects and technologies he believes will work for this market.

Does Solar Offer Sustainability For Its Startups?

It is estimated that roughly 92 per cent of start-ups in India are bootstrapped- a rather telling statistic. Vareyn Solar is among this 92 per cent, “We started the company with our savings. Initially, we did small projects like residential rooftop battery systems along with consultancy work on utility scale projects and today we are handling utility scale ground mounted projects and rooftop mounted large commercial clients. During the course of scaling up and the growth phase, we have developed our installation teams”.

Ishan Chaturvedi’s voice could well be the voice for many other bootstrapped solar startups that have managed to script a success story for themselves without any external funding support. Especially in the EPC or installation segment, the structuring of payment terms, especially in the retail and smaller deals, is heavily front-ended, to help the contractor manage his working capital. The same issue has tripped up many a start-up and young firms in larger contracts, forcing some to even exit the business due to payment delays.

Others like SolarSquare, that started-out bootstrapped, raised $4 million, led by early-stage venture investment firm US-based Good Capital in June 2022. Still others like Zunroof, started by IIT alumni have diversified to cover broader segments in sustainable technologies to attract investors, with limited or strong success potential.

But the funding environment is changing quickly for the better. “Oorja Development Solutions is a funded startup company. We have raised over $1.3 million to date in equity capital and non-dilutive funds. Our major investors are Schneider Electric Energy Access Asia fund, Water & Energy for Food (WE4F) and The DOEN Foundation,” reveals Dr Chambon.

Dr Chambon further points out, “The funding environment for solar and agri-tech startups is very active in India and internationally, as these are priority sectors for the energy transition and development needs. As our focus is on the UN Sustainable Development Goals, we partner with impact investors and philanthropic investors mostly. In our experience, Indian investors tend to be focused on new technology innovations whereas global investors are more open to service innovations such as ours that are faster to market.” Last year, Oorja secured $1 million in seed funding.

More recently, solar tech startup Renkube secured $24 million in a seed round by CIIE.CO.

A startup incubator itself, founded by IIM Ahmedabad, CIIE.CO has come up with the concept of as well as hosts India’s first accelerator and established the cleantech fund- a first-ever. CIIE.CO has accelerated more than a thousand startups and funded more than 300 startups.

Invergy’s Pandey, on the other hand, has managed growth on the back of his existing businesses and goodwill of his partners. “We are bootstrapped. We have been lucky to have had some very strong and supportive partners on our startup journey, but it is a journey that is still new as far as we are concerned.

The funding environment has improved vastly, especially if you have a track record of some sort.” he says, indicating the possibility of fund raising in the future.

Ketan Mehta, Managing Director & CEO, Rays Power Infra- a leading integrated solar power manufacturing company, underlines the importance of funding, “Funding plays a vital role in every sector. We ensure strong planning for each and every activity that we undertake.”

The Startup Segments

Bhaskar Palit, Managing Director, Boond Engineering & Development,  reckons, “AI, Data Analytics, O&M, data analytics and design” offer more opportunities for start-ups. “Empanelment, auctions are really not start-up friendly and also not friendly for mid cap/size players. In the Indian scenario, we are so cost sensitive, which sometimes act as a bottleneck to quality product/services. We are so obsessed with L1 culture in the auction process that some quality and genuine players are left behind and slowly goes into oblivion. Also, in the case of empanelment, it is really tough for start-ups to match financial eligibility, conditions on past experience and P&L requirements for empanelment, this makes some promising start-ups to die a slow death.”

That has meant a focus by many startups on providing services, ranging from data analytics, to management of assets to even the financial modelling of large projects and more. Firms like Mumbai-based PV Diagnostics have carved a niche in areas like technical evaluation and quality control, building a viable business out of making solar plants perform better.

Solar O&M is widely expected to be the next big area, as large Indian developers who have hitherto managed their O&M themselves eventually follow the global model and relinquish O&M in favour of external partners. This is because practices and technologies involved in solar O&M are evolving, and nimble start ups can offer much more at a lower cost at times.

Propelling Innovation

In fact, it would be fair to say that start-ups are constantly revolutionising the industry through their unique offerings, both by way of products and end-to-end solutions.

Ishan says, “With the advent of panel technology, EPC deliverables and increasing customer expectations, we see a lot of avenues for startups in our industry. SaaS is picking up neatly in India right now, solar plant monitoring and maintenance need a facelift so the clients can understand the technicalities and their plant performance in a better way. As the industry is growing, there are many more avenues which will be open for startu-ps, wherein they can bring their innovative approach to the foreground to create value for the end customers.”

Saas start-ups are certainly at the forefront of innovation- right from data monitoring to sales. Start-ups like SenseHawk (where Reliance recently picked up a large stake)  are coming up with SaaS based platforms that benefit solar stakeholders in a cost-effective manner. Solar-based innovations pioneered by start-ups, are especially conspicuous in agritech and rural areas or even the disadvantaged sections. Dr Chambon says, “There are opportunities in service-based delivery models to make solar technology accessible to disadvantaged consumers who are not able to invest in solar, but have the ability to pay for energy services.”

Oorja itself attributes its success to the model of pay-per-use farming services since “90% of the farming population has no other way to afford solar technology due to high upfront cost barrier, lack of maintenance, low awareness and other barriers for adoption.” Dr Chambon concludes with another emerging opportunity, “Renewable energy certificates – these are now available for decentralised renewable energy projects as well, creating a new revenue stream for solar startups…. There are also technical innovation opportunities for more energy-efficient appliances with high output, especially larger productive appliances such as agro-processing mills or fridges, that can be powered by solar energy.”

The Way Ahead For Start-ups

Simarpreet Singh, who was featured on Forbes 30 Under 30 Asia list for Hartek Group- a start-up many years ago, has firm faith in the potential of start-ups, and makes a powerful statement about them, “This century belongs to India, and the contribution of startups will constitute a sizeable part of it.” But before this is achieved, there are some major challenges to conquer, he indicates, “Even though the governments have been incentivising star-ups in a big way, hiccups remain. Innovation needs capital and that is only available to ideas that can be proven. It is my personal belief that start-ups should be encumbered only by absolutely necessary regulations.”

The most critical need that will need to be addressed is innovation, and linked to that, finance. While all stakeholders we spoke to indicate an improved environment for funding, much more needs to be done. “Government initiatives like the PLI scheme (Performance Linked Incentives) make for good headlines and numbers, but they reward size and existing players,” says a leading mid-scale module manufacturer who didn’t want to be named. Others point to the vibrant funding ecosystem that has developed in the EV space, which suffers from a much less government role in policy making relatively. Solar, unlike many other ‘hot sectors today,  is not about increasing consumption. It is about doing something that needs to be done to save the earth, it is about cleaner energy, even cheaper energy in most cases”, as a participant said.  If that doesn’t get market support, it will not be solar’s failure, but the markets failure to value the future.

If It’s Solar, It’s Got To Be A Technocrat

If there is one thing that distinguishes solar startups, it has to be the qualifications and experience of the founders. Over the years, and especially in the context of this story, we have noticed that most startup founders in the space tend to have some work experience, and technical exposure to the sector. While that is obvious for those targeting the maintenance and analytics space for instance, many of the  large and small developers have had previous experience of the sector before plunging in on their own. Industry insiders point out that the energy sector itself is tightly regulated, which demands a high level of understanding of the impact of these regulations. Quality checks, certifications, and ever changing norms are a regular part of life for start ups too, and expecting absolutely green founders to stay on top of these is tough. This has to be one of the few sectors where it is perfectly normal to see founders with 15 plus years of experience, hard at work nurturing their startups. Firms like Hyderabad based Windstream Technologies, with a roster of highly experienced management, if not the rule, is certainly not the exception. The firm, after a period of development, has achieved some breakthrough deals for its solar mills and hybrid energy solutions recently. Technical backing also means that again, unlike consumer sectors, firms flaunting their many patents is no oddity here, as technocrats who value innovation push hard to stand out.

The Charge Of the EV Brigade

EV startups, especially EV charging startups deserve attention too, as they increasingly turn to renewable sources of energy to reduce their carbon footprint further. After all, an electric vehicle powered by renewable energy could achieve carbon neutrality almost three years ahead of ICE vehicles, according to some estimates. When it comes to EVs, the jump in interest in startups is best demonstrated by the numbers. Investment in EV focused start-ups moved from $195 million in 2020 to  $550 million in 2021 and to $660 million and counting in 2022.  According to ETAuto Research, EV startups managed to mop up nearly $400 million across 20 deals in 2019, the breakthrough year for them. The headline investment was the  SoftBank-led $250 million round  into Ola Electric, making it the first unicorn from EV space. Since then, no startup in the segment managed to go past $1 billion valuation or more. Ather Energy and a few others are also reckoned to be on the edges of unicorn status. Interestingly, most of the large active investors such as Sequoia Capital, Tiger Global, Softbank, Matrix Partners, Accel, Nexus Venture Partners have stayed away from investing in this space. That is partly due to the apprehension that the EV market will eventually be led by global (Chinese) majors, especially in batteries, something that multiple Indian startups are trying hard to disprove. Tiger Global’s investment in battery swapping network startup Battery Smart is an exception. The New York-based fund had led a $25 million round in the Gurugram-based firm. Previously, it also invested in Ather Energy and Ola Electric but did not participate in their new rounds in 2022. Lightspeed made its maiden investment in an EV startup with a $13 million round in Exponent Energy. Ev registrations of two-wheelers crossed the 80,000 mark for the first time recently. Unlike solar, state governments are moving much faster to  develop complementary policies to promote EV adoption. Recently, the Delhi government announced that it targets to achieve 80% electrification of the Delhi Transport Corporation (DTV) fleet within the next three years. It aims to become the first city in India to have 8,000 electric buses as part of its public transport fleet. Haryana, Rajasthan, and Tripura approved electric vehicle policy while the Uttar Pradesh government has prepared a draft of the policy (2022-2027) with the aim of bringing the state into electric vehicle mode by 2030. As per the policy, 15% rebate will be given on the purchase of two or four-wheeler electric vehicles, e-buses and a 100% discount on their registration and road tax in the state. In Karnataka, Bangalore Electricity Supply Company Ltd (Bescom) said that it aims to install public electric vehicle charging stations every 500 meters throughout the city (Bengaluru). Meanwhile, the states of Maharashtra and Goa scrapped the policy pausing subsidies for electric vehicles (EVs). On the charging front, hectic efforts are on at ground level with EV charging startups pushing to grab prime spots and establish networks. In an evolving market, many questions have been raised on the standards, quality, and even pricing of these charging points. With power costs as high as Rs 18 per unit or more in some cases, some have argued that these high prices would be counter productive. However, there is zero doubt that without the startups in the space, a viable charging network would take much longer to establish.