Post Covid 19, will solar industry look to diversify downstream and upstream in manufacturing?

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Sunil Badesra, Business Head, Sungrow (India) Pvt. Ltd.

Like any other industry, solar industry is also getting impacted by COVID-19 pandemic and creating a bit of uncertainty in the mind of people. After any such unprecedented event with the magnitude of impact never seen before, many organizations will redefine their strategies. Business across industries will realign their processes, redesign supply chain to recover quickly from such difficult situation, yet staying agile in the coming times. However, vertical integration in either way of upstream or downstream always needs to be evaluated by individual organization to find the best alignment between their existing core businesses and market demand. Also, it is not necessary that upstream or downstream integration will always help as it comes at a significant cost and specific risks (for solar industry).

Further, it seems that project execution and order closures in solar industry are going to get delayed by 2-3 months due to this virus outbreak. At the same time, it is expected that Solar Industry will be more focused and put their finest effort to minimize the potential effect of COVID-19 on the projects and their organizations. Hence, Solar sector being the leading source of power generation at the cheapest tariff will likely to emerge stronger in long term, after few months of challenges. 

As a leader of innovation in the industry, Sungrow has already taken necessary measures to have proper supply of raw materials and components for Inverter manufacturing to ensure timely order execution of our customers.

Mr. Daniel Liu, Managing Director – South Asia & Central Asia, Jinko Solar

Solar Industry across the World is going through never-seen-before tough situation. Cashflow has been negatively impacted across Solar value chain in India. Operational Solar PV Projects are expected to get delayed revenues or no revenues in case of Open Access projects. Construction of Projects is halted, resulting into stoppage of cashflows to EPCs & Equipment suppliers. Lenders whose existing EMIs are deferred, are preferring to wait for certainty before approving new loan or disbursing next installment of approved project loan. 

Cash is going to be king now & in near future, especially when whole world is experiencing a historical recession. Post-Covid 19, all stakeholders across the value chain will be more sensible in safeguarding their own interests. Solar companies will put their efforts & resources to rebuild its own business operations. Their utmost priority will be to fence its cash & cashflows. It will help them in surviving the after-effects of Covid-19. 

In this situation, Solar Industry will not prefer to look for domain diversification (whether upstream or downstream of solar value chain), in search of new business avenues, at least not in near future. Instead, it will divert & utilize its existing resources including cash, in strengthening its core business. With this approach, it will have more chances to succeed due to known territory and familiar business nitty- gritties. 

Post-Covid 19, Solar companies will surely adapt new business strategies from geographical diversification, digitalization, robotic cleaning, usage of advanced solar module technologies to upgradation of solar manufacturing lines. Another key development, that occurs when any sector goes through tough situation, is expected to happen. That is Sectoral Consolidation. Cash-rich Solar companies & wealthy new entrants into Solar sector, will prefer to overtake under-valued existing solar companies facing cash crunch, who had been overvalued during good times. 

If specific case of Solar manufacturing value chain is to be considered in India, this Covid-19 situation has put us in the strategic position to rethink our upstream to downstream strategy. When it comes to setting up solar manufacturing in India, Jinko Solar is always doing some research & keep an eye over Indian policies for Solar Manufacturing. Jinko Solar is in continuous process of evaluating partner for local manufacturing. However, in such economic environment under pandemic, every manufacturer is becoming conservative than ever, especially regarding setting up new manufacturing facility. Because multi hundred million capital investment is required. Government needs to play key & big role in developing manufacturing environment in any country. The certainty on timeline, scale of importing duty, clarity over tax benefits & exporting incentives are much more critical for new investment decision in manufacturing. Other factor which is most important that government needs to be convinced to trade- off between lower PPA tariff and local employment-&-technology set-up. Because it takes more than five years to recover the investment in Solar PV manufacturing, if that plant runs at 100% efficiency.

Mr. Brijesh Prajapati, Managing Director, SofarSolar

The entire world is on edge with the Coronavirus epidemic, it’s a very bad impact on global economy.COVID-19 crisis has already wreaked major havoc across the world, and the solar industry has not been immune & the COVID-19  pandemic will have a significant impact on the global solar PV market.

We have revised down our 2020 growth forecasts for several major industries, including Renewable,  Consumer & Retail, Autos, Construction, Power, Oil & Gas (upstream and downstream), Infrastructure and Mining. We have made upward revisions to our forecasts for Household Food Spending Healthcare, Cloud Computing & on some essential products.

Raw materials for manufacturers to component delays for developers, both upstream and downstream PV players have already felt the weight of the pandemic as it continues its global trek, infecting hundreds of thousands and sparking talk of a worldwide recession.

The impact of the coronavirus will mostly hit in our first-quarter growth. It could extend to the second quarter as well if the outbreak lasts longer. The disturbance to industrial production and global trade flows and global logistic networks could be more severe due to a drag caused by the prolonged production shutdowns.

Our first-quarter  & as per current situation on second quarter reported Upstream production is expected to be lower than fourth-quarter 2019.

Our First and second quarter reported Downstream in  solar inverter demand lesser  is expected to be in a some reduction to develop Solar project demand due to COVID-19.

During to COVID-19 some projection going on very delaying stages & also  it will be going on negative profitable marginal impact business on entrepreneur ,small scale EPC segment & Dealer so it will take some time for stable situation India. Besides some inverter companies  have long vision  work & ready to invest (assets & certification)  in Indian market with very small profitable marginal business.

“Factories do have spare capacity and may cover up for lost exports by ramping up production. However, the India demand will be lesser or similar  as compared to our previous numbers and this will have an impact on total production,”
The Covid-19 outbreak has made it more difficult to achieve the targets due to the challenges of land acquisition, grid unavailability, supply chain bottlenecks and a lack of project financing

In a Manufacturing sector also every product depend on raw materials or third party vendor . in this epidemic cycles it’s very difficult get material on time & execution on time also.

 Hopefully we will stable soon in renewable segment & also other verticals in india.

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