The Impact of COVID-19 on Indian Solar Industry

The Coronavirus crisis is having a far-reaching impact across the global manufacturing space. Among the various sectors that will bear the brunt is India’s solar power industry. India can be looking at months of delays due to disruption in the supply chain.

To gain more insights, Energetica India speaks to some of the industry’s C-level professionals.

ENERGETICA INDIA: How will the coronavirus situation impact India's renewable energy industry?

Dr.Kushant Uppal: The basic components of solar panels i.e. solar cells come from China. Also, the government has been promoting LFP chemistry from China rather than the NMC which is provided by brands like Samsung and LG. In essence the Indian solar industry is highly dependent on China and a prolonged shutdown will have a severe impact on government based projects. The government should promote alternates to the solar cells by promoting thin film and other technologies which are not dependent on China. Also, on batteries cells should be developed in India while promoting NMC technology from the branded manufacturers. This is an opportunity to bring the best technologies and quality to the government funded projects.

Manish Gupta: China is the largest producer of solar raw material globally. It supplies 85% of the raw material to the solar industry. China virtually controls the entire value chain from silicon to ingot, wafer, cell and module. Any potential strain could have an adverse impact in supplies.  Southeast Asian module manufacturers to a large extent rely on Chinese suppliers for things like Solar cells, Glass, backsheets, frames, junction boxes,”. “If there is a long hold on those in China, their module assembly capacity may eventually be affected.”

The coronavirus outbreak in China could raise solar module prices in the near term as manufacturers have already begun experiencing wafer, cell and solar glass shortages. Production rates are also being affected by an extended new year holiday introduced by the authorities as a measure to deal with the virus, and the requirement workers from infected areas quarantine themselves for two weeks.

Puneet Goyal: Yes, the coronavirus has definitely affected the renewable energy market, in the last quarter of the financial year of 2019-2020 when everybody wants to commission projects especially private to take advantage of the tax benefits of the association, already the demand is high and historically the price is already high in this quarter. The coronavirus has even further added to be the soft increase in the prices, and even though the panel shipment has been delayed by a few weeks. The impacts on the pricing is very high as what was expected, so because of this we already stress margin of EPC players who are even more stressed. so, it does not help us at all, and us being the end of the value chain where we are almost the end consumers of the panel. All the variability across the value chain from the procurement of the bill of material of the panels to the manufacturing to the supply chain, all that variability comes back on to us and in return, we have to bear the brunt of the increasing prices because we already have signed contract with our end customers.

Ms. Imaan Javan: Like many other countries worldwide, India imports solar components from China, wherein the cost for solar modules accounts to almost 60% of the total cost of a solar project. However, due to the recent coronavirus crisis in China, there have been delays in the overall supply chain of manufacturing solar components. Currently, the Chinese companies dominate the Indian solar components market due to competitive pricing wherein they supply 80% of solar cells and modules. The coronavirus outbreak has highlighted the fact that several countries including India are heavily dependent on China for solar component manufacturing and do not have a diversified manufacturing base that can cater to the demand in the light of any kind of crisis. Considering all these factors, the Indian solar industry experts believe that India could benefit from the coronavirus crisis by investing in solar component manufacturing.

Gyanesh Chaudhary: India’s renewable energy industry, like many others, is suspected to see challenges ahead due to the Coronavirus outbreak. Since, India is depended on Chinese firms to supply about 80% of solar cells and modules used in the country, the outbreak will present the issue of depletion in raw material supply to support Indian green energy future.

Supply disruptions, delays in production, delays in quality checks and transport of components due to the outbreak are already visible in China, which are leading developers to declare force majeure. In this scenario, we should be appreciative of the Government for supporting this measure to aid solar project developers.

As domestic solar manufacturers, we feel that although, Indian module manufacturing capacity can satisfy its own demand, prolonged slowdown in China will cause raw material shortage and affect us as well. Therefore, we appeal to the Government to immediately turn focus on building in-house manufacturing scale and making financial solutions available.

Simarpreet Singh: The coronavirus onslaught will lead to a delay in execution of projects, stretching the completion schedules. Projects which are to be commissioned by June will be particularly affected. Rating agency CRISIL has estimated that about 3-GW solar projects worth Rs 16,000 crore will bear the brunt of coronavirus. Since most of these projects are connected with the interstate transmission system, any inordinate delay in their commissioning may invite transmission/point of connection charges from the Power Grid Corporation of India under Long Term Open Access rules. The prices of components like solar modules will go up in the short term with cheaper supplies from China drying up. This hike will be reflected in an increase in project costs as well with modules making up for roughly 60 per cent of the cost of a solar project. India sources about 80 per cent of its solar modules from China, which is worst affected by this health crisis. But things will be back on track if the situation returns to normal by the middle of this year. Thankfully, developers have been exempted from penalty for any delay in commissioning of projects due to the present circumstances with the Union Finance Ministry agreeing to invoke the force majeure clause to allow more time to developers to complete their projects without inviting any fine. The force majeure clause exempts both the parties from fulfilling their contractual obligations in extraordinary circumstances beyond human control, like wars, riots, crimes or natural calamities.

Gagan Vermani: The outbreak of this novel virus is hampering businesses around the world, especially the supply chain. Consequently, the solar industry is also not untouched as some shipments are getting stuck thereby delaying the projects in India. A large share of equipment (solar photovoltaic (PV) panels, raw materials, etc.) is imported from China. This is going to have a spiraling impact on the economics of the on-going Projects too.