Solar sector’s response to Covid

The COVID-19 outbreak occurred in the fourth quarter of the fiscal year 2019–20 when solar project deployment in India was at its height. The solar sector in general, and particularly in India, was not immune to the pandemic’s effects, and many companies were concerned about its uncertain future. 

India has set a lofty goal of attaining 100 GW of solar energy capacity by the end of 2022. It was commendable to observe how the government and solar industry reacted to the coronavirus outbreak and established a strategy to achieve its objectives. At that time, the government’s involvement was important in addressing these challenges and deciding the rate of solar energy adoption in the following years. 

However, India’s rooftop solar industry has started to gradually recover from the adverse effects of the COVID-19 pandemic, with the country returning to normalcy with the removal of lockdown restrictions and the relaxation of standards and regulations by the government. 

Challenges encountered by the solar industry owing to the pandemic include diminished growth possibilities due to uncertainties regarding future electricity consumption; higher offtake risk including delayed payments, PPA renegotiation and curtailment; sluggish growth in the distributed solar market due to a lack of capacity and/or a halt in assistance initiatives; the risk of rising trade barriers and conflicts; and lack of competitive financing solutions.

The Indian government declared this pandemic as a force majeure condition for project developers, citing deadlines and penalties as justification. The pandemic was expected to have an effect on solar project installations in the first part of this fiscal year, with recovery commencing only in the second half. 

Typically, the industry completes the bulk of projects before the monsoon season. However, the majority of these projects were launched six months later. The solar industry’s working capital cycle was likely disrupted, and payments were postponed. Smaller solar sector players struggled to manage their cash flow and were badly harmed, but bigger firms were able to weather the storm and recover sooner. The rooftop solar sector has been affected since these firms were small and had the financial resources to endure losses.

The ministry of new and renewable energy (MNRE) stated that all developers experiencing difficulties and expecting time extensions should submit formal applications to implementing agencies with documentary evidence in support of their claims, and that these applications would be evaluated on a case-by-case basis. The industry had been asked to produce all the necessary written evidence to support its case. As a consequence, developers had to file notices with authorities as soon as possible in order to avoid issues in the future by justifying their delays.

The RBI’s decision to grant a three-month moratorium on installment payments for all term loans and working capital loans was a major step forward. Solar developers were required to request this benefit from their lender; however, some faced a greater burden of financing costs because interest continued to accrue and was most likely payable immediately following the end of this period.

India’s power usage had plummeted since commercial and industrial activity had decreased dramatically. A number of thermal power plants were forced to retire, and with the loss of predictable electricity, there were worries about the system’s impact from a growing amount of unpredictable renewable energy generation. To avoid possible curtailment, MNRE stressed the need to have renewable energy projects operational and reiterated that all distribution businesses must make timely payments.

Despite this assertion, states such as Punjab and Uttar Pradesh have reported that they had been unable to obtain relief and subsidies. States like Madhya Pradesh and Andhra Pradesh had said that they were unable to pay generators because they were unable to collect consumer dues. As a result of delayed payments from distribution corporations, solar project developers faced cash flow issues. This eventually had an effect on solar project developer ratings in the future, resulting in higher financing costs and decreased investor trust. 

Following the current situation, there was also concern that power purchase agreements (PPAs) would be violated, which could deter the solar industry as a whole in the long run. It was crucial for the solar industry to get timely payments, which could then be reinvested in new projects, in order to keep the sector alive. 

Conclusion

The COVID-19 outbreak had a huge impact on the solar industry, with issues such as cash flow difficulties, payment collection from distribution businesses, working capital needs, workforce availability, and, most critically, supply chain disruptions. The government’s reaction to this situation was mainly positive, with the purpose of reducing the negative implications for the sector.

In the current context, India’s solar business is gradually recovering from the damaging effects of the COVID-19 epidemic, with the nation’s solar industry returning to normality after the government’s easing of norms and regulations. 

Solar Labs was founded by an IIT alumni in 2017 to accelerate solar adoption in the world.