The global outbreak of pandemic novel Coronavirus, COVID 19 has significantly hampered the functioning of all sectors including institutions, commercial establishments, offices & various manufacturing units which are also at standstill. The outbreak of Covid19 has far-reaching impacts ranging from the shutdown of factories, challenging job conditions, and supply chain disruption. With these impacts, more businesses with exposure to China are likely to see the country as a potential risk factor. The conventional power industry will not be significantly impacted as the gestation periods are long. However, for renewable energy projects such as solar, some timelines need to be met to get incentives such as feed-in-tariffs from the government. Some of the company’s critical suppliers have stopped production, which is expected to commence only by the end of February, says GlobalData.
Due to pandemic-situation of coronavirus(COVID 19) various government bodies like SECI, CEL, MNRE are postponing site visits and extending the projects deadlines.Projects that are awarded through competitive auctions also have obligations to be completed within specified timelines. Such projects may suffer if suppliers are not able to meet the delivery schedules.
Dr. Fatih Birol, the IEA’s Executive Director said, “The coronavirus crisis is affecting a wide range of energy markets – including coal, gas, and renewables – but its impact on oil markets is particularly severe because it is stopping people and goods from moving around, dealing a heavy blow to demand transport fuels,”.
Sterling and Wilson, one of the leading players in the power sector, recently stated that the spread of coronavirus in China will have an impact on its business in the short-term.
Governments are implementing various plans to counter the economic damage from the coronavirus. These packages offer an excellent opportunity to ensure that the essential task of building a secure and sustainable energy future doesn’t get lost amid the flurry of immediate priorities.
Some of the actions taken by various Government bodies are: India’s Finance Minister Nirmala Sitharaman announced relief measures for taxpayers and businesses on statutory and regulatory compliance matters related to several sectors. The Ministry of Finance ordered that Coronavirus will be covered in the force majeure clause and should be considered as a case of natural calamity. The Ministry of New and Renewable Energy (MNRE) has issued a notice to Discoms stating to clear their dues regularly as was being done before the lockdown and the notice also states that they should continue to buy power from renewable energy producers but some state Discoms, however, used that order to start curtailing renewable energy power(Partially or completely) terming the prevailing situation a ‘force majeure’ condition. The Central Electricity Regulatory Commission (CERC) has rescheduled the implementation of the fifth amendment of deviation settlement regulations from April 1, 2020, to June 1, 2020. The Ministry of Power has directed CERC to provide a moratorium of three months to DISCOMs, to make payments to the generating companies and transmission licensees and not levy any penalties for late payments. The Punjab State Power Corporation Limited (PSPCL) In an email notice stated that the Ministry of Shipping has directed all major ports to ensure that no penalties, demurrage, charges, fees, or rentals are imposed on traders, shipping lines, concessionaires, licensees or other port users for any delays due to the lockdown in the country.
IEA suggests that Large-scale investment to boost the development, deployment, and integration of clean energy technologies – such as solar, wind, hydrogen, batteries and carbon capture (CCUS) – should be a central part of governments’ plans because it will bring the twin benefits of stimulating economies and accelerating clean energy transitions, Governments can make clean energy even more attractive to private investors by providing guarantees and contracts to reduce financial risks.
“Taking these steps is extremely important because the combination of the coronavirus and volatile market conditions will distract the attention of policymakers, business leaders and investors away from clean energy transitions”, Dr. Birol added.
We also spoke a number of Indian Business leaders for their views on short and long term impacts we may see. Here’s what they said.
Adarsh Das, CEO, and Co-Founder, SunSource Energy said, “In the short run, the industry will face challenges in completing the projects on time due to the supply chain disruption. Over 80 percent of major supplies come from China and a lockdown in that region has certainly delayed the project commissioning dates by at least a quarter. Other challenges that most of the developers are facing are in terms of raising capital and mobilizing manpower to manage assets to maintain the guaranteed generation levels. Fortunately, the central government and the Reserve Bank of India have stepped in on a timely basis and have made significant announcements to infuse much-needed liquidity in the market and address other development-related challenges. While the government has intervened strongly, the ball is essentially in the virus’s court, so to speak at this time. We stay optimistic and believe that this is a blip and the industry will continue to tackle such challenges”.
Sterling and Wilson Solar in conversation said, “With the World Health Organisation declaring the novel coronavirus outbreak as a global pandemic it certainly won’t be business as usual, and it is clear that the solar energy sector is going to be partially affected as well. However, the impact of Solar EPCs and IPPs may not be as severe as it might be for other businesses. According to sources, supplemented by conversations with some of the key equipment suppliers in China, it is refreshing and promising to know that nearly 80 percent of the solar industry in China has recovered, and by mid-May, we expect the supply chain disruption to be fully restored. Jiangsu and Zhejiang provinces, which form the hub of PV module manufacturing, will resume normal operations by May. There was a shortage of people coming to work from across the province, due to the outbreak of the virus and the mandatory 14-day quarantine. Those employees are gradually resuming work as curbs are being lifted and the situation is getting better with time.
Besides this, there are a lot of materials further downstream in the supply chain used to create the PV panels – steel, glass, wafers, and aluminum frames – that come largely from China, for which the supply chain is gradually getting restored to normalcy. The one area where we could see the impact stretching longer is for the PV module guys wanting to expand their cell capacities. The laser cutting equipment/machinery used for mono-PERC technology cells are primarily manufactured from Wuhan in Hubei province – the epicenter of the coronavirus outbreak. We don’t expect this region to recover completely for the next 5-6 months.
With WHO classifying the Coronavirus outbreak a pandemic, solar project companies will be able to invoke force majeure, a clause that nullifies the regular terms of the contract if an unavoidable catastrophe occurs. However, the clause does not excuse a party’s non-performance entirely but only suspends it for the duration of a period.
Solar companies across geographies have started declaring force majeure on meeting project completion/ delivery deadlines because of partial supply disruptions caused by the coronavirus outbreak. The Indian Ministry of Finance announced last month that the coronavirus outbreak is such an occurrence, and solar companies qualify for force majeure to avoid penalties due to missed deadlines. Various Governments have recently clarified that the force majeure clause will be invoked after due diligence, given the widespread near-term impact on the global solar energy supply chain and paucity of project management resources, owing to precautionary lockdown in various countries. This means that projects that are affected will be given additional time to execute their work.”
Subrahmanyam Pulipaka, Chief Executive Officer of National Solar Energy Federation of India said, “The Government’s decision to order a nationwide lockdown for the next 3 weeks so as to flatten the curve and make an attempt to stop the spread of the virus is a commendable move. It is a welcome and prudent move, given the alarming rate at which this virus has spread globally and the loss of lives it has resulted in already.
Naturally, the renewable energy sector is not insulated from the impact of COVID-19 and the sector faces serious headwinds in the immediate future. As generators our members are ensuring to keep their plants operational and continuing to supply power to the grid. We not only have an obligation to our counterparts but to the society and the country so that we keep the country running while people stay at their homes to break the chain.
NSEFI has made a series of recommendations to the Prime Minister’s Office, MNRE, Department of Financial services and every state government’s energy department to protect the interest of RE industry
Below are some of the salient requests we have made
1. Extension in all timelines for Solar and Wind Projects: The Ministry should provide a blanket extension of 6 months to all under-construction solar and wind projects without seeking any documentation as the current lockdown has impacted everyone uniformly.
MNRE has responded positively
2. Payment of energy bills: Ministry should direct SECI/NTPC to consider making immediate payments to wind and solar developers to help them maintain business continuity.
MNRE issued an OM dated 1st April regarding the same
3. ALMM Effective date: MNRE had proposed to implement ALMM from 1st July 2020 onwards, however, owing to the COVID-19 epidemic, the effective date should be pushed out by at least 12 months.
4. New Bids and auctions to be suspended till the situation normalizes: All new bids for which bid submissions have not already happened, shall need to be suspended to a date, which should be at least 3 weeks after the normal business operations start.
5. Guidelines to relax payment of demurrage charges and avoid delay in unloading of material shipments in India: The Ministry may request the custom and port authorities to ensure that in the Ongoing period of lockdown, no demurrage penalties be levied and safe unloading of shipments must be ensured, without putting undue financial burden under the current situation.
Ministry of Shipping issued an advisory for the same
6. Extension of LTA timelines: As a result of the impact of COVID-19 pandemic, projects shall get delayed in commissioning against their committed schedules. In case of such delays, the Central Transmission Utility (Or PGCIL) typically seeks payment of transmission/POC charges as per the applicable regulations. We would urge you to request MoP to come out with a suitable notification so that the projects are not unjustly burdened with such charges under the current Force Majeure scenario.
7. Suspension of Forecasting and Scheduling penalties: Forecasting and Scheduling activities are dependent on a lot of allied activities for delivering accurate forecasts. Under the current lockdown, the allied activities are either completely shut or will be working with skeletal systems that are impacting the overall forecast quality. We would therefore urge you to request RLDCs and SLDCs via the Ministry of Power to suspend penalties on generators arising out of implementation of the Forecasting and Scheduling Regulations during the lockdown period.
8. MNRE to urge the Prime Minister’s Office to come out with guidelines for all government departments whereby they enhance validity of licenses, approvals and NoCs without any requirement of renewal applications or payment of associated statutory fees, till up to September 2020.
9. MNRE to direct states and its entities to ensure that there’s no delay in invoicing, billing and payments for RE projects: Renewable generators should be allowed to bill in digital mode and their payments should be made promptly so as to ensure continuity of business operations. Even if it is not possible to undertake Joint Meter Readings, alternate mechanisms should be made acceptable for interim period.
MNRE issued an OM dated 1st April regarding the same
10. State to direct Discoms to make payments of Safeguard Duty / GST amounts due to all RE generators:
· Full payment where declaration of change in law has been done by the SERC and
· Partial (minimum 50%) payment where the declaration is yet pending.
11. States shall allow relaxation in Banking Norms and group captive compliance for Group Captive and Open Access projects by extending the banking period by 6 months, as lockdown has resulted in partial or complete closure of various industrial and commercial establishments.”
Manoj Gupta, VP-Solar and Waste to Energy Business, Fortum India Pvt Ltd said “The overall industry has been collectively facing the challenges and limitations posed due to the COVID-19 outbreak. All the under-construction solar projects in the country have been halted and developers are concerned about the delays their projects are facing because of the production slowdown in China and the lockdown orders in India. There have been delays in the procurement of modules, panels and other essential components and disruptions in the supply chain. Due to lockdown, all labor had gone back home and material movement, etc. was completely stopped. We appreciate the government’s efforts and initiatives for considering solar power generation as an essential service in its recent announcement and allowing the movement of staff, vehicles, and material required in operations of utility-scale solar plants. In addition to the above measures, the Ministry has also agreed to treat projects that are delayed due to disruption in the supply chain as ‘force majeure’, which is a welcome move for the industry to get relief in the project completion process. In this lockdown scenario, MNRE has already issued the notification that Renewable projects must run and will not be affected by Force majeure situation and also discoms need to release all the payments as per the PPA terms & condition. MNRE’s support at this juncture is commendable and going forward for under-construction projects, the industry will require further support from MNRE for proper extension of the timelines of the project.”
K. R. Harinarayan, Founder and CEO, U-Solar Clean Energy said, “Since March it has been a time for us at U-Solar to increase our skill levels and improve on internal processes. All of U-Solar Clean Energy’s projects are on a standstill due to the Coronavirus lockdown, our site staff and contractors have been evacuated to ensure social distancing is practiced. Post lockdown however, our operations will reach optimal productivity in May as the supply of materials is provided by our vendor partners. For the newer projects that were scheduled for June, we can expect delays depending on the supply chain cycles of solar modules manufacturers who import material from China –an order takes 45 days. And we are preparing to account for such a delay through our internal procurement process. This is not an issue for inverter manufacturers as many of them have facilities in India that will be operational post April 15th but may still require 20-25 days to recover to reach peak performance.
As the Global Outbreak of Coronavirus has affected all sectors, businesses will focus on resolving their losses. The solar industry might suffer a slowdown as industrial and commercial companies re-focus internally while institutional sectors have impending responsibilities as well. U-Solar will however continue to execute our projects for the next 4-6 months, however as a result of the economic slowdown we expect a longer lead time for our sales cycles. There have been no concerns towards existing investments, as a developer, as they continue to generate clean energy. It is an important time to reflect on clean energy’s impact in the fight against global warming and climate change, having understood that active and serious responses to crisis situations are possible by Governments. We urge the Government to declare a climate emergency and act upon it as a crisis – as sooner or later the situation bearing the impacts of it can be catastrophic to lives and the economy.”