Coronavirus outbreak: India’s solar sector could try and play catch-up

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New Delhi: With Chinese vendors alerting Indian developers about delays in production, quality checks and transport of components due to the coronavirus outbreak, Indian solar industry captains believe there is an opportunity in this crisis.

Modules account for nearly 60% of a solar project’s total cost. Chinese companies dominate the Indian solar components market, supplying about 80% of solar cells and modules used here, given their competitive pricing. India has a domestic manufacturing capacity of only three gigawatts (GW) for solar cells and 10GW for wind power equipment.

“The coronavirus crisis reflects India’s inability to create a diversified manufacturing base beyond China. Based on this experience, it is probably one of the best opportunities for Indian companies to invest in sectors such as solar cell, module and inverter manufacturing,” said Sunil Jain, chief executive officer of Hero Future Energies Pvt. Ltd.

India looks to position itself as an alternative manufacturing destination for global companies after the coronavirus outbreak exposed how heavily they are reliant on China for raw materials and production, Mint reported on Monday.

Top government officials are holding meetings with industry representatives as the disruption in China due to a lockdown in huge swathes of the country has opened up opportunities for India to emerge as an alternative manufacturing destination.

At play is India’s renewable energy programme, which would require $80 billion in investments till 2022. This figure will grow more than three-fold to $300 billion during 2023-30. India imported $2.16 billion worth of solar photovoltaic (PV) cells, panels, and modules in 2018-19.

At present, India has an installed power generation capacity of 367,280 MW, of which around 23%, or 84,399 MW, is generated through clean energy projects. India has become one of the top renewable energy producers globally, with ambitious capacity expansion plans to achieve 175GW by 2022 and 500GW by 2030, as part of its climate commitments.

For China’s solar panel manufacturing industry, the major global markets are the US and India.The surge in imports led the National Democratic Alliance (NDA) government in its previous term to impose a safeguard duty from 30 July 2018 on solar cells and modules imported from China and Malaysia. This will be over in July this year. Also the Union budget approved an enabling mechanism to raise tariffs on imports of green energy equipment such as solar cells and modules.

The crisis may impact India’ green energy trajectory, with around 3 giga watt (GW) of solar projects, worth  ₹16,000 crore, could be at risk of penalties for missing their project completion deadline if the coronavirus impact prolongs, according to CRISIL.

Anand Kumar, secretary in the new and renewable energy ministry told Mint that the government and contractual entities will consider developers’ request for extension of project commissioning if the requisite evidence is presented.

Mint reported on 6 February that power project developers in India, who source solar modules from China, plan to declare force majeure on meeting project completion deadlines because of supply disruptions caused by the coronavirus outbreak. Invoking the force majeure clause enables a developer to cite disruption from an unforeseen event—in this case the flu epidemic—to justify the delay.

According to a communication from India procurement policy division of the Department of Expenditure to all central government ministries and departments reviewed by Mint, “A doubt has arisen if the disruption of the supply chains due to spread of corona virus in China or any other country will be covered in the Force Majeure Clause (FMC). In this regard it is clarified that it should be considered as a case of natural calamity and FMC may be invoked, whenever considered appropriate.”

Any attempt at solar power generation capacity will find traction with the government that wants state-run companies to build massive clean energy parks at a cost of around $2 billion each, with built-in incentives to ensure states and operators are invested in the success of the parks.

Source: Live Mint