The faltering addition of solar power capacity in India is likely to be further hammered by the coronavirus disruption, making it more difficult to meet energy transition targets
The coronavirus epidemic is a setback for India’s solar energy sector (Image by Vektor Kunst)
The global coronavirus outbreak that erupted in China, the world’s biggest supplier of solar equipment, has India’s project developers staring at delays and losses that could seriously compromise the government’s targets of adding renewable power capacity in the country.
Shipment delays and production losses have disrupted the supply chain that would likely splinter tight installation schedules in India at a time when slowing growth in the solar sector was already causing concern.
Nearly 3 GW of solar projects in India, worth some INR 160 billion (USD 2.12 billion), could be at risk of penalties for missing their scheduled commercial operation date if the impact of coronavirus on trade with China is prolonged, according to an analysis by Crisil, the India arm of rating agency Standard and Poor’s. “These projects are now in the process of either placing orders or receiving delivery of modules,” Manish Gupta, senior director at Crisil Ratings, said in a statement. “Hence, any delay at this stage can prove costly.”
Parts of China went into lockdown in January, forbidding the movement of people and temporarily shuttering factories. China is not only the largest maker of solar photovoltaic equipment, accounting for about 70% of the global market, it is also the biggest producer of lithium-ion batteries. Supply chains were almost immediately disrupted. India imports nearly 80% of its solar cell requirement from China.
Increased costs
The stoppage is likely to harden cost of projects, besides impacting completion schedules, according to industry associations. “Solar prices are expected to rise with the cost of PV (photovoltaic) modules increasing, as a result of the virus outbreak,” the Confederation of Indian Industry, a lobby group, is reported to have said in a presentation. “This is due to a shortage in module glass and wafers needed to create these systems.”
To cushion the immediate shock of disruption, India’s finance ministry has notified that solar projects will be given relief through extension of completion deadlines under Force Majeure provisions, which invokes extraordinary events or circumstance beyond human control.
The disruption has severely impacted equipment shipments and installation activity. “Module, inverter and other material shipments are delayed across the board and there is no clear visibility over how long the disruption will last,” according to Bridge to India, a cleantech consultancy.
The coronavirus epidemic couldn’t have come at a worse time. Solar installations in India have been slowing through the past year and more. Project commissioning remained slow in the fourth quarter of 2019 that ended in December, with 1,845 MW of capacity addition, 37% below an estimate of 2,919 MW by Bridge to India. “Land and transmission bottlenecks continue to delay project schedules and a constrained funding environment persist,” said the latest iteration of India Solar Compass.
Targets may be compromised
India has set a target of installing 175 GW of renewable energy by 2022. The success of the renewable energy market is crucial to India’s achieving its Paris Climate Agreement targets. The South Asian nation has committed to reducing greenhouse gas emissions intensity of its gross domestic product (GDP) by 33-35% below 2005 levels by 2030, and to reaching 40% of installed electric power capacity from non-fossil sources by the same year. Disruptions due to the coronavirus epidemic might compromise the government’s targets.
The slowdown was visible in 2018 as well. Solar capacity addition in India in that year declined by 15.5% to 8.3 GW compared to 2017, according to Mercom India Research. Investment in renewables in India fell 16% to USD 15.4 billion in 2018, international think tank REN21’s Renewables 2019 Global Status Report had said last year in June, mainly due to solar. Investment in it declined 27% to USD 8.2 billion. The slowdown hit jobs growth between April 2018 and March 2019, according to Powering Jobs Growth with Green Energy, a report released in July last year.
Although China seems to have some success in controlling the spread of coronavirus, many of its factories are still not operating at full capacity after their extended shutdowns due to paucity of staff and raw materials. Many solar manufacturing plants outside China that rely on import of aluminium frames and photovoltaic glass will also feel the brunt of the virus’ impact, according to Wood Mackenzie, a consultancy.
The 21-day India-wide lockdown from the midnight of March 24 can only make matters worse, especially if it is extended.
It seems clear that India will struggle to achieve its energy transition goals. To cite just one instance, the rooftop solar capacity in India is likely to reach 15-16 GW by the end of 2022, according to JMK Research, which is only one-third of the 40 GW target set by the government.
Trackbacks/Pingbacks