Coronavirus Outbreak a Cause of Concern for Domestic Solar Energy Industry: ICRA

ICRA has said that the outbreak of coronavirus in China poses a concern for domestic solar developers and OEMs due to disruption in the supply chain

Rating agency ICRA has said that the outbreak of (COVID-19) coronavirus in China poses a concern for domestic solar developers and original equipment manufacturers (OEMs) due to disruption in the supply chain for key components used for manufacturing solar modules.

“The COVID-19 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,” the rating and research agency issued in a statement.

This development could potentially play spoilsport in the near term, it 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 VP – corporate ratings at ICRA said that 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 the 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 the last quarter of FY2020 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 upward pressure on expected bid tariffs, Majumdar said.

“As a result, a 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 percent 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, the rating agency said.