India’s nationwide lockdown to contain the Covid-19 epidemic has stopped production of wind turbines and is likely to stall capacity growth in the sector
The rapid global spread of Covid-19 pandemic has plunged the wind power industry into unprecedented uncertainty, and India is no exception. Supply and labour disruptions from the current lockdown in India could delay 400 MW into 2021, which is a downgrade of more than 11% for 2020, research firm Wood Mackenzie said.
“The impact of the coronavirus is top of mind for the global wind industry and embodies a crisis unlike anything the market has even seen,” Dan Shreve, Wood Mackenzie’s Head of Global Wind Energy Research, said in a statement. “The state of the pandemic is evolving on an hourly basis, resulting in a highly reactionary environment.”
Over 3 GW of wind projects are under construction and are scheduled for completion in 2020 in the South Asian country. India will only add 1.95 GW of wind energy capacity in 2020, Bloomberg New Energy Finance (BNEF) said, which is 24% less than its earlier estimate of 2.56 GW.
Another indication that India’s wind power installation targets will be blown away by the coronavirus disruption is that all major turbine manufacturers in the country, including Siemens Gamesa, Vestas, Inox Wind, GE and LM Wind Power, have shuttered factories, severely affecting production.
India in recent years has emerged as the third largest energy hub for wind power and the primary alternative to Chinese wind energy component production. An interruption in supply is sure to stall installations both domestically and abroad in Western markets.
Global wind energy additions in 2020 could decline by 4.9 GW versus earlier projections, Wood Mackenzie said. It means a drop from its earlier projections of almost 78 GW to 73 GW now.
There was a high correlation of Indian states with the highest coronavirus infection rates and areas favourable to wind and solar development, Wood Mackenzie said. For example, Gujarat’s 1.4 GW of new wind farms installed last year accounted for 58% of India’s new additions in 2019. It is also in one of the top 10 worst hit states for Covid-19 cases.
Companies are also facing the difficult task of trying to keep turbines running while looking after their employees, BNEF said. Electricity generators are usually exempt from even the strictest countrywide lockdowns, but health and safety regulations often require technicians to work in pairs or groups on-site, making social distancing impossible, the Bloomberg consultancy said.
“The timing of the lockdown is unfortunate as Q1 (January to March) is typically one of the busiest periods for wind project installations,” Robert Liew, analyst at Wood Mackenzie, said in a statement. “The lockdown will delay some projects until summer, and if the lockdown is extended past April, wind farm construction could be further delayed into the monsoon season, where wind installations are typically at their lowest.”
Analysts had warned that an extension of the lockdown could seriously affect both utilities and developers. Prime Minister Narendra Modi has extended the nationwide lockdown by another 19 days to March 3, just before the first 21-day lockdown was supposed to end on Mach 14.
Worsening a slowdown
The lowered estimates for capacity addition comes in the back of an already slowdown situation in India. Project developers in the country added only 2.4 GW of wind power capacity in 2019, according to the Global Wind Report 2019, compared with 4.1 GW installed in 2017. This was the second year of slowdown, as a mere 2.5 GW was added in 2018, according to data made available by Indian Wind Turbine Manufacturers Association.
While more than 17 GW of capacity has been auctioned across the country by various power purchasing agencies in last three years, nearly one-third went unsubscribed or was cancelled post-award due to various factors, the report revealed. These include stringent tender conditions; low tariff caps; off-taker risks; unavailability of grid and land availability. More than 80 per cent of awarded projects have been delayed by six to 12 months, said the report by Global Wind Energy Council (GWEC).
“Greater efforts are needed to nearly double installed capacity by 2022 – less than three years from now – and looking further, to deliver the government’s 2030 target of 450 GW of renewable energy,” Francis Jayasurya, India Director, GWEC, said in a statement.
India is the world’s fourth-largest onshore wind market by installations, with 37.5 GW of wind capacity as of 2019. It has set an ambitious target of 175 GW of renewable energy capacity by 2022, of which 60 GW will come from wind energy. The country’s target is to install 450 GW of renewable energy by 2030, of which 140 GW will be wind-based generation. However, a slowdown in the domestic solar sector indicates that these targets look a little farfetched now. See: Coronavirus pandemic dims India’s solar prospects
Competition in onshore wind auctions from 2017 to early 2019 drove prices to as low as INR 2.4 per kWh, GWEC said. “These low captured prices were used to benchmark bids in subsequent auctions, all of which went undersubscribed,” it said. “At the same time, barriers to implementation increased. As a result, awarded capacity has been abandoned or relinquished, installation has slowed significantly and many suppliers have struggled, reflecting the very real hazard of price/revenue attrition compounding existing market risks.”
The market is expected to be lumpy in the next three years, due to supply and demand realities, the annual wind report said.