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In what could come as a huge relief for solar developers, the Ministry of New and Renewable Energy (MNRE) will come up with guidelines for solar projects that could be delayed as a result of the coronavirus.
Sources in the power sector told BusinessLine that the government is putting final touches to the guidelines, which will include an extension of timelines for completion of projects.
“We are given to understand that there could be extensions for projects without the risk of penalties,” a Maharashtra-based solar developer said.
An email sent to MNRE did not elicit a response.
A force majeure clause is used when events beyond human control such as wars, riots, crimes, or natural calamities, occur, which can free both the parties from contractual liabilities.
According to the standard terms of Power Purchase Agreements or PPAs, if a project developer does not complete the project in a specified timeline, it attracts penalties. Also, in some cases if delays extend more than three months, then it can result in project cancellations.
Other companies that BusinessLine spoke to confirmed that they had also heard of extension of timeline for delayed projects. “Some shipments are getting stuck, thereby delaying the projects in India. This is going to have a spiralling impact on the economics of the ongoing projects too,” stated Gagan Vermani, Founder and CEO, MYSUN, a rooftop solar company.
The outbreak of Coronavirus has hit the global supply chain. PV modules, cells, accessories such as wires, cables and solar inverters are imported from China. These constitute 80 per cent of India’s solar sector relationship imports. This has had a trickle down effect as a result of which projects faced signing delays.
A few days back rating agency CRISIL pointed out that nearly 3 GW of solar projects, worth ₹16,000 crore, could be at risk of penalties for missing their respective scheduled commercial operation date (SCOD) if the impact of Coronavirus prolongs. Also, this puts at risk around 3 GW of solar projects auctioned between July and August 2018, which need to meet their SCODs by July 2020.
Already there are likely cost overruns, which companies estimate to be 20-30 per cent higher than initial project costs. The government’s guidelines could ease some of the pain on the sector, industry watchers said.
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