COVID-19 Impact On Solar Manufacturing: Indian Solar Leaders Speak

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The outbreak of Coronavirus has far-reaching impacts from the shutdown of factories, challenging job conditions to supply chain disruption. With these impacts, more businesses with exposure to China are likely to see the country as a potential risk factor, says GlobalData, a leading data, and analytics company. The current scenario in the world is going to affect its power demand and generation. China is a leader in wind power installation, wind turbine manufacturing, and solar photovoltaic (PV) manufacturing. Due to suspended manufacturing and construction work, the renewable power sector is badly hit by the impact of the COVID-19, specifically wind and solar PV, which could witness lower capacity.

China is the biggest manufacturing economy and solar PV equipment manufacturing, globally. Of the top ten solar PV manufacturers in terms of module shipments, the majority of them are China-based. These include Jinko Solar, JA Solar, Trina Solar, LONGi Solar, Risen Energy, GCL System, and Suntech. Coronavirus-hit province Zhejiang is home to a few of Jinko Solar’s manufacturing works, the largest Solar Module Super League (SMSL), while JA Solar is also involved in manufacturing operations in the province. The NEA and the State Grid Corporation of China (SGCC) have notified about the threats coronavirus outbreak poses to the power industry and the Chinese Photovoltaic Industry Association (CPIA) has recommended the Chinese government to delay connection deadlines of large-scale solar power projects on March 31 and June 30. 

“The impact of Coronavirus is no longer confined to China or any specific industry, with the outbreak threatening supply chain disruption for businesses across industries and boundaries. China’s role in the global supply chain is critical, and original equipment manufacturers (OEMs) across all sectors and countries have already started feeling the pinch from a shortage of parts/raw materials. As the lockdowns in China have prevented workers from going to work, manufacturing and supply chain disruptions have been forcing companies in other countries to halt production”, said Aurojyoti Bose, Lead Analyst at GlobalData.

The coronavirus outbreak will affect the overall supply chain and solar installations as India is heavily dependent on Chinese raw materials and components such as aluminum framing and solar PV glass. In India, around 2.3GW of solar plants were expected to be commissioned from June to August 2020. However, the delivery of these projects has been impacted by the coronavirus (COVID-19) pandemic reported by GlobalData.

According to the Confederation of Indian Industry (CII), the solar sector is expected to see a rise in the prices of components due to decreased production, as well as constraints faced by the supply chain and logistics around procuring components from China where production is reduced due to the pandemic. The virus outbreak has generated other issues for the Indian solar industry, with shipping companies having stopped uploading materials from Chinese ports and transporting them to other countries, including India.

The All India Solar Industries Association suggested exempting solar module producers in Special Economic Zones (SEZs) from 25% safeguard duty on imports of solar cells and modules for domestic facilities. CII also recommended removing the higher customs duties imposed on any products that are primarily sourced from China that may need to be sourced from other countries due to the pandemic. The Indian Government may have to reconsider the recent imposition of higher duties as well.

CII has shown concerns for the completion of solar projects scheduled in the next two quarters and has decided to re-visit the import strategies for solar module sourcing. The confederation has encouraged Indian PV manufacturers to consider the current situation as an opportunity to build a strong and competitive domestic solar manufacturing industry. 

We also spoke to several Indian Business leaders for their views on short and long term impacts we may see on solar manufacturing. Here’s what they said.

Mr. Bharat Bhut, Director-Goldi Solar said, “The Coronavirus (COVID-19) outbreak has not only caused a slowdown of China’s economic growth but has majorly affected the economies of different countries including India as well. Amid this chaos, the Indian solar manufacturing industry is assumed to get most affected as over 80-90 percent of solar components are imported from China. 

As per the current reports, India is already assuming shipment delays of several months, risking multiple and huge solar projects behind the fixed schedule. Also due to the coronavirus outbreak, the Indian solar manufacturing industry believes there is an opportunity in this crisis as the nation looks to position itself as an alternative manufacturing destination for the global firms. This happened as India got exposed to how heavily it was relying on China for solar raw materials and production. 

An Adverse Impact in Supply is Predicted 

Supplying more than 80 percent of solar raw material in India, China more or less controls the maximum value chain from silicon to ingot, wafer, module, and cell. Now amid the Coronavirus chaos, it’s believed to bring potential strain, radically impacting the national solar manufacturing market. 

Also, the Indian solar manufacturers largely rely on Chinese suppliers for items like glass, solar cells, back sheets, and junction boxes. If there is a long hold on these things in China, the module assembly capacity might eventually be affected, hampering the Indian solar manufacturing industry up to a great extent. 

A Surge in the Solar Module Price 

Post coronavirus outbreak, a rapid surge in the solar module prices is assumed as the Indian manufacturers have already begun experiencing shortages in solar glass, cell, wafer, etc. and not only this supply squeeze is going to hamper the production but also the workers who are residing in the infected areas are quarantined till the situation is normal and under control.”

Vineet Tyagi, Head-Sales and marketing, Insolation said, “The Covid-19 virus outbreak has forced the Government to order a shut down across the country which will soon affect every individual and corporate both directly and indirectly.

Solar Manufacturing sector faces a double challenge. First, there are going to be serious supply chain level disruptions. This is due to the ongoing disruption in supply chain for sourcing of Wafers/Cells/Glass and uncertainty over the timelines for normalcy in manufacturing operations in China which itself accounts for more than 80% of solar raw material worldwide. Because of this we may see the spike in Solar PV module price levels in the near term. The continuous sliding of Indian Rupee against US Dollar will further add to the price woes.

Second, on the demand side, we are already seeing a slowdown in the tendering of solar PV projects. The virus outbreak has delayed the completion schedule of the already awarded projects. The outbreak may further affect the tendering process in the current year with resources being diverted to other important areas. 

Meanwhile the export market for solar modules may remain subdued as activity stalls in the key export destinations of Europe, US and Africa. Hence manufacturing output and investment will be under pressure for the next quarter or so.

However there is a silver lining to the current crisis as well, India can look to position itself as an alternative manufacturing destination for global companies after the corona virus outbreak exposed how heavily they are reliant on China for raw materials and production.”

Vineet Mittal, Director, Navitas Solar said, “The present COVID19 situation’s impact on Indian solar manufacturing began from the time it affected China ( from Jan 2020) as there is a high dependence on China for our raw material supply chain. And with the lockdown announcement, things have gone from bad to worse.

Apart from the various government relief measures of offering moratorium on Bank loan EMIs and Interests, a lot more needs to be done to bring back normalcy and recover back from this global crisis.

However, looking at the brighter side, we believe that once this situation globally comes under control, countries and corporations world over would slowly begin to shift their material requirements from China to other countries and India would be a natural choice for this. Already, we are hearing positive statements from senior most government officials and ministers that the Indian manufacturing sector should take advantage of this situation and aggressively go for export markets along with national demand.

So, maybe, just maybe, this might be the final push that was needed for the Indian government policy think tank to push Indian manufacturing and bring it on a global level. They might offer new packages of tax/duty restrictions against imports and incentivize local manufacturing and then export.

Hopefully, Indian EPC and Developer companies will decide to go for more locally manufactured Modules, inverters and other components and this will also create additional demand from the existing market itself.

We remain positive about this Covid19 situation to recover quickly and wish to contribute our small bit for the Indian solar manufacturing segment.”

Manik Garg, Director, BD of Saatvik Green Energy said,  “India, along with our major economies of the world, is sure to enter into an economic crisis amidst and post COVID 19, especially as it is already supported by lower GDP last financial year. Speaking of solar, it is important to understand the position of our industry in the utility pyramid. There shall be repercussions at multiple levels.

Essential services and products will be the earliest to pick-up sales immediately after the situation normalizes. Households and the private sector will work on reviving their core business rather than making capital expenditure in solar systems. This period could be from at least 6 months to 2 years in different scenarios. Majority of demand shall only be from government projects. We very well know that SGD will wipe out in August, while we shall still be getting out of this situation. By that time, China will already have excess stocks of finished goods ready to be shipped out, at much cheaper costs, impacting the Indian solar industry at large.”

Mr. Vamsi Krishna Gaddam,Joint Managing Director, Visaka Industries Limited said, “Impact of COVID 19 pandemic on Indian solar manufacturing has been two-fold, both on the supply side and the demand side. Solar manufacturing in India is heavily dependent on Imports of cells from China, and hence, massive disruptions in the supply chain have been witnessed. 

Usually, cells are not stocked, and hence there has been a dip in capacity utilization. Similarly, on the demand front, with a shrinking economy restricting the cash flows, budgets and yearly projections of the coming financial year, it is expected to impact the investments into this sector; mainly on the rooftop front where the demand is from individual and institutional owners who are majorly risk-averse and would not like to venture into an ancillary investment during the period of economic downturn. 

Also, ground-mounted projects will have an impact due to shortages in the workforce as the lockdown would drive many migrant labourers to find local jobs going forward with the uncertainty looming around contract jobs. Major impact on textiles, electronics, Pharma and food processing industries which are mainly export-oriented, and also leading investors into solar power will have a direct impact on the C&I sectoral growth. Similarly, the residential sector will see a significant dip in investments due to the uncertainty in household cash flows. 

Though no extreme change in pricing of panels is currently seen, with capacity utilization falling continuously and mounting overheads, there can be a noticeable impact on pricing as well. While this being the darker side of the impact, the silver lining would be that companies will realize that solar power is an excellent risk-mitigating factor in future pandemics when there can be severe blockades in power transmission and distribution, thereby impacting industry performance.”

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