The Covid-19 pandemic could deal a significant blow to the Indian solar industry, as the commissioning of projects will be pushed back. But it also appears likely that distribution companies will be slow to make payments to developers, as revenue continues to slide in response to declining power demand.
“Unfortunately, it’s still early to define impact on the industry as there is confusion all around,” said Vinay Rustagi, managing director of Bridge to India. “While import shipments have gradually resumed [with China resuming PV production], the focus now is very much on what happens within [India]. Our understanding is that physical progress has nearly ground to a halt as normal free flow of goods, on-site construction activities and travel facilities are severely restricted.”
On solar market recovery, Rustagi presented two case scenarios: “The best case scenario is that the lockdown is lifted in mid April and normal business resumes immediately thereafter.”
“Otherwise, we see significant delays in [solar] project commissioning and operation activities. More importantly, sustained depression in power demand—reduction in power demand for an extended period of time, say 2-3 months or longer—would result in a domino effect on DISCOM finances, their payments to power plants, who may then be faced with defaults to their lenders.”
Discom revenues are taking a hit with fall in power demand due to shutdown of commercial and industrial operations across India.
“Power demand has already fallen by more than 10%. Reduction in demand from high paying commercial consumers and delay in payments for other consumers is likely to have a debilitating effect on discom finances,” stated Rustagi.
The government has been quick to provide relief to solar project developers by declaring coronavirus a force majeure. This means solar project developers who miss contractual obligation deadlines because of coronavirus-prompted supply chain disruption can invoke force majeure clauses to avoid financial penalties.
However, Rustagi feels claiming a force majeure could be challenging, given the various factors varying from project to project.
“Hopefully, the industry will get time extensions as expected under force majeure provisions but even this process may not be straightforward as each project situation would be different depending on actual status, contractual position and views of the counterparts,” he said, adding “We are also hoping the that lenders will take a lenient view, supported by guidance from Reserve Bank of India (RBI), and provide debt-service flexibility to borrowers.”
This content is protected by copyright and may not be reused. If you want to cooperate with us and would like to reuse some of our content, please contact: email@example.com.
If.. DISCOM’s face Lower Demand… this Reduction MUST BE MET BY BURNING LESS POLLUTING FOSSIL FUELS… This can be readily achieved… specially when kniwn ahead of time (hours… even minutes).. with mininal Damage/Penalty/Loss.
THIS HAS TO BE THE NATIONAL POLICY ENFORCED BY THE STATE REGULATORY AUTHORITIES.
Solar Energy is driven mostly by Society’s Demand for Cleaner Air… specially in India… where Annually over 2 Million Die Prematurely due to Pollution alone (the highest in the world at present).
Perhaps.. someone can better explain why Solar Energy must be Penalized during Low(er) Demand.. by reduced Payments by DISCOM’s.
It appears habits die hard for “old school” DISCOM Officials who are more interested in “scratching the backs” of Polluting Fossil Power Plant Owners/Officials rather than help Reduce Pollution and the Suffering of many Millions more… actually ALL 1.3 BILLION IN INDIA … WHO SIMPLY CANNOT ESCAPE…. the Debilititing and Fatal Effects of Pollution…. the raison d’etre of Solar Energy and Man’s Right(s) to Clean Air…. Is It Not..???
By submitting this form you agree to pv magazine using your data for the purposes of publishing your comment.
Your personal data will only be disclosed or otherwise transmitted to third parties for the purposes of spam filtering or if this is necessary for technical maintenance of the website. Any other transfer to third parties will not take place unless this is justified on the basis of applicable data protection regulations or if pv magazine is legally obliged to do so.
You may revoke this consent at any time with effect for the future, in which case your personal data will be deleted immediately. Otherwise, your data will be deleted if pv magazine has processed your request or the purpose of data storage is fulfilled.
Further information on data privacy can be found in our Data Protection Policy.