Covid-19: Renewable energy sector may miss the capacity target for FY20

The renewable energy sector in India is expected to miss its capacity addition target for the fourth year in a row.

The sector, already battling headwinds, has to now contend with the spread of the coronavirus (Covid-19), which has caused disruption in the supply chain for some parts in the manufacturing of solar modules.

“India is dependent on Chinese firms for supply of about 80 per cent of solar cells and modules used in the country. Supply disruptions, delays in production, delays in quality checks and transport of components due to the outbreak are already visible in China, which are leading developers to declare force majeure,” Gyanesh Chaudhary, Managing Director, Vikram Solar, told BusinessLine.

As against the capacity addition target of 11,802 MW for 2019-20, the renewable energy sector added only about 8,443 MW, which is about 72 per cent of the target, during the 11-month period this fiscal.

Project completion

“Project commissioning remained slow during the December quarter due to several execution and debt financing related challenges. March quarter is the busiest part of the year for new installations, as developers and contractors rush to complete projects ahead of the financial year-end. However, this year would be an exception. We expect slow progress on project completion in anticipation of safeguard duty expiry in July 2020 and shipment delays due to coronavirus,” said Bridge to India, a renewable energy consulting firm.

So, given the existing and new challenges faced by the sector, this fiscal may also see the sector falling short of the target.

In 2018-19, the clean energy sector added just 55 per cent (8532 MW) of its target of 15,602 MW, while in the year before, it achieved a total capacity addition of 11,754 MW as against the target of 14,450 MW for 2017-18. For 2016-17, the capacity addition was 11,320 MW as against the target of 16,660 MW for the year.

However, capacity additions in FY17 and FY18 were among the highest in the history of the renewable energy sector.

External dependence

Industry representatives and analysts felt that the Covid-19 outbreak has highlighted the fact that depending on China or any other country to build a sustainable energy future for India may not be a viable option.

Only improving the local manufacturing scale can lead to success in establishing energy security and reliability.

The industry has appealed to the government to immediately turn the focus on building in-house manufacturing scale and making financial solutions available.

“As for India, stepping up as the leading solar supplier for the world is certainly a possibility. However, such a venture would require immediate and enhanced support in solving internal issues (safeguard duty/impending BCD, GST) and implement favourable policies to invest and aid in building domestic solar manufacturing capacity that can satisfy India’s domestic green energy requirement and help the country to take on a larger role as a global solar exporter,” Chaudhary said.