Coronavirus outbreak poses further concern for solar energy sector: Icra

Topics Coronavirus | ICRA | solar energy

Ratings agency Icra on Monday said the outbreak of deadly coronavirus poses concern for domestic solar developers and original equipment manufacturers (OEMs) due to disruption in supply chain for key components used for manufacturing solar modules.

The solar energy sector is already facing several headwinds because of the long delays by state distribution utilities in making payments, Icra said.

"The COVID-19 (coronavirus disease) outbreak in China has posed one more concern for both domestic solar developers/IPPs as well as module OEMs, due to ongoing disruption in the supply chain for key components used for manufacturing of solar modules," Icra in a statement.

This development could potentially play spoilsport in the near term, Icra said, adding that the sector is already facing several headwinds due to issues such as long delays in making payments by state distribution utilities, execution in delays for projects bid out over the past two years due to challenges in land acquisition and securing transmission connectivity and financing in a timely manner.

Sabyasachi Majumdar, Group Head & Senior Vice President - Corporate ratings, ICRA said, "Given the import dependency on China for sourcing of PV (photovoltaic) modules, the execution timelines for the ongoing utility scale/roof-top solar projects are likely to be affected with delays in the delivery of PV modules."

This is due to the ongoing disruption in supply chain for sourcing of modules/cells and uncertainty over the timelines for normalcy in manufacturing operations in China for solar OEMs, he added.

For domestic module manufacturers/OEMs, he said, sales volumes are likely to be impacted in last quarter of FY20 and in the near term, given this uncertainty.

Solar PV module price levels may spike in the near term from the current level ranging between 20-21 cents/watt putting an upward pressure on expected bid tariffs, Majumdar said.

"As a result, de-risking strategy so as to identify and ensure the alternate supply chain other than China in the long run would be critical for domestic IPPs/OEMs," he added.

There is already a slowdown in tendering of wind and solar PV projects by 25 per cent to 8.6 GW in 2019 from 11.5 GW in 2018.

The ongoing challenge may further affect the tendering process and project awards in the current calendar year, given the fact that the resolution of issues on tariff renegotiation as well as grid curtailments by state utilities in Andhra Pradesh is still pending, Icra said.

Dear Reader,

Business Standard has always strived hard to provide up-to-date information and commentary on developments that are of interest to you and have wider political and economic implications for the country and the world. Your encouragement and constant feedback on how to improve our offering have only made our resolve and commitment to these ideals stronger. Even during these difficult times arising out of Covid-19, we continue to remain committed to keeping you informed and updated with credible news, authoritative views and incisive commentary on topical issues of relevance.

We, however, have a request.

As we battle the economic impact of the pandemic, we need your support even more, so that we can continue to offer you more quality content. Our subscription model has seen an encouraging response from many of you, who have subscribed to our online content. More subscription to our online content can only help us achieve the goals of offering you even better and more relevant content. We believe in free, fair and credible journalism. Your support through more subscriptions can help us practise the journalism to which we are committed.

Support quality journalism and subscribe to Business Standard.

Digital Editor

Business Standard is now on Telegram.
For insightful reports and views on business, markets, politics and other issues, subscribe to our official Telegram channel