5.5 GW PV Additions in India in FY21; 15% Decline due to COVID-19: ICRA

According to ICRA, the solar PV capacity additions in FY 2020-21 are expected to remain subdued given the continued execution challenges due to COVID-19.

The domestic solar PV capacity additions in FY 2019-20 has remained lower by about 15 percent than the previous estimate of 7-7.5 GW, mainly on account of the disruption in supply chain and execution disruption in Q4 FY20 due to the COVID-19 pandemic. And, according to independent and professional investment information and credit rating agency ICRA, The solar capacity addition in FY 2020-21 is further expected to remain subdued given the continued execution challenges post lockdown restrictions since March 2020, which have resulted in disruption of the supply chain as well as labour availability issues.

This has added to the woes of the sector which continues to remain plagued by various execution related issues such as delays in land acquisition, receipt of evacuation approvals, regulatory delays in tariff adoption and obtaining financial closure in a tight financing environment.

Girishkumar Kadam, Sector Head & Vice President, ICRA said, “The solar capacity addition during FY 2020-21 is expected to come down further by 15 percent to about 5.5 GW given the execution headwinds amid lockdown restrictions post-COVID pandemic. This also assumes the execution delays by about 4-5 months for many of the under-construction projects and expected normalcy in construction activity during H2 of the current fiscal. Nonetheless, the backlog of the awarded project pipeline continues to remain strong with more than 15 GW of aggregate project capacity, thus providing healthy visibility on capacity addition over the next 2-year period.”

Further, the announced tender pipeline by Solar Energy Corporation of India (SECI) has been significant. Strong policy focus and improved tariff competitiveness keep the solar sector prospects intact in the long run.

However, in the current scenario, says the ICRA note, with the dip in demand post lockdown due to COVID pandemic, revenues and cash flows of the state-owned distribution utilities have been affected leading to an increase in the counterparty credit risk for the sector. Receivable cycles from the states of Andhra Pradesh, Telangana and Tamil Nadu remain severely stretched at 10-12 months impacting the overall liquidity position of developers.

“Further, timely resolution of tariff issue, (which is still pending at SERC and Divisional bench of High Court in Andhra Pradesh), for the IPPs in state of Andhra Pradesh remains extremely crucial for the renewable energy sector,” said Manasa Gopidi, Assistant Vice President, ICRA.

The note concluded by highlighting that the recently notified liquidity relief scheme in May 2020 for the state-owned distribution utilities has been a positive short-term measure that would benefit the IPPs impacted by the long delays in receiving payments from the discoms. However, there has been limited progress so far and thus, the timely implementation of this scheme remains important.