Impact of COVID-19 pandemic on the Indian renewable sector
In the wake of the COVID-19 pandemic, the Indian renewable sector is dealing with rising uncertainties. Because of lockdown, the sector is grappled with falling power demand, poor health of DISCOMs, supply chain disruption for under-construction projects, shortfall of labor, delays in equipment supplies, delay in land acquisition activities, etc.
In Q1 2020, the solar and wind installations dropped significantly with addition of only 720 MW of solar and 188 MW of wind projects. This is about 60-70% lower than new solar and wind installations (average about 2-3 GW) in previous four quarters.
Especially in March 2020, only 222 MW of solar capacity and 25 MW of wind capacity was installed as activities came to a complete halt because of lockdown. With no activity for the first 40 days of Q2 and strict restrictions post that, the installations are expected to remain slow for Q2 2020 as well.
The pace is expected to pick up from Q3 2020 onwards. As per the equipment shipment data received by JMK Research for Q1 2020, about 650 MW of string inverters and 1,163 MW of central inverters were supplied across India. Modules of more than 1,567 MW were shipped in Q1 2020. Basis this data, it is expected that in the next two quarters i.e. Q2 2020 and Q3 2020, about 1,700-2,000 MW of new solar capacity is likely to be commissioned.
Before COVID-19, CY2020 was anticipated to be the year of growth for solar and wind installations in India. However, because of the current crisis, about 3 GW of solar and 2.5 GW of wind projects (whose scheduled commissioning timeline was 2020) are likely to be delayed. According to the revised estimates, in CY2020, only about 5.5 GW of new solar capacity and 1.5 GW of wind might be added. While in FY2021, about 6.5 GW of new solar capacity and 2.2 GW of new wind capacity is expected to be installed.
In this hour of need, the Government of India has announced a slew of measures in support of the RE industry. In view of the supply chain issues from China, other countries, MNRE has introduced a provision that any delay in project commissioning due to COVID-19 be treated as Force Majeure condition. The Ministry has provided a blanket extension of 70 days to all solar and wind projects under the pipeline. MNRE has also directed the DISCOMS to continue scheduling power from renewable energy sources on a ‘must-run’ status. Ministry of Power has provided relief to DISCOMS by reducing the Letter of Credit (LC) amount to 50% of power procured.
Even though the Government is supporting the developers in all possible ways, assessing the actual impact of COVID-19 pandemic on the RE sector is difficult and only time will tell the long term implications of this situation.