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Solar Industry: Under the Weather

solar industry

China, the epicenter of the COVID-19 pandemic, is a major supplier of solar modules. India depends on its neighbor for 70% of its module requirements. The inference from these two points doesn't bode well for the solar industry in India.

There had been signs of trouble even before the lockdown in China and later India, and the consequent supply disruption. Rooftop installations in India had declined 12% to 7,346 megawatts(MW) in 2019 from 8,338 MW a year ago, a first in five years, according to clean energy research firm Mercom. This had more to do with the slowdown in the Indian economy along with the tariff cap and liquidity issues following the non-banking financial companies crisis, its report says. Investments in the sector were also lower by 16% compared to 2018.

Rating agency CRISIL says supply disruption of solar modules in the next four-six months could lead to project completion delays; 3 GW of solar projects worth Rs. 16,000 crore could be at the risk of missing deadlines and possible invocation of force majeure clauses in contracts. A force majeure clause changes contractual obligations for parties in the event of extraordinary circumstances. This may help solar developers behind these projects to avoid penalties for defaulting on repaying creditors, but their credit profiles may be dented.

Before the Coronavirus crisis became severe, the industry had been hoping to make up for a rough 2019 in 2020 considering the government's solar power installation target of 100 GW by 2022 as part of its international clean energy commitments. In the recent [ Union ] Budget," Raj Prabhu, CEO, Mercom Capital Group said "But a lot will be dependent on the economy and this leading situation getting back on track, the impact of Coronavirus, and the outcome of the 20% basic customs duty announced. In light of the crisis, industry insiders say project delays are inevitable. Sumant Sinha, chairman, and managing director, ReNew Power, says that a prolonged disruption in economic activity and corresponding supply disruption can impact some of the company's projects due for commissioning later in the year.

At present, India has an installed power generation capacity of 367,280 MW, of which 23% is generated through clean energy projects. In 2019, solar power accounted for 41% of new power capacity additions, while coal accounted for 44%. Some have tried to shine the light on the positive angles in this crisis. The Confederation of Indian Industry (CII) says this is an opportunity to build a strong and competitive domestic solar manufacturing industry. But it will be several times before that happens.

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