The ‘Corona' Threat To Solar Energy Sector

The sunrise industry faces a Covid-19 eclipse and needs a helping hand to pull through.

- V Rishi Kumar

Will it be a Black Swan moment for the solar energy sector? The Covid-19 outbreak will not only hinder the execution of several projects but the supply chain disruption threatens to hurt the sector in the near and medium term.

Even before the virus hit businesses worldwide, the sector had its hands full, addressing concerns such as payment delays from distribution companies, renegotiation of power purchase agreements, anti-dumping concerns, transmission-related issues and financing, leading to execution delays. Covid-19 further compounds this litany of problems. There are fears that it could hit availability of capital, especially for independent power producers (IPPs), liquidity on both equity and debt could be further constrained. Project time lines will likely be hit due to disruption in logistics. BusinessLine spoke with several players in the sector, and rating agencies who closely monitor the progress of projects, to get the pulse. Excerpts from the interaction.

Supply chain disruption

Raj Prabhu, CEO, Mercom Capital Group, feels the sector’s supply chain will be the most affected because the viral spread is global. “Initially, it started with solar component shortages as manufacturing facilities in China were shut down, which has now trickled down to other markets, including India, the US and Europe.”

Solar module costs will go up in the short term due to shortage and this could cause some project commissioning delays. Since India mostly assembles modules and has limited cell manufacturing capacity, most Indian manufacturers may not benefit much from the crisis. “If the problems persist into the second half of the year, there will be a decline in Indian solar installations this year. In 2019, India added 7.3 GW of solar, which was a 12 per cent decline compared to 8.3 GW installed in 2018,” says Prabhu.