The recent surge in COVID-19 cases across the country has pushed several states under curfews and lockdowns, which is expected to result in project commissioning delays for solar projects, according to industry analysts.
According to Jyoti Gulia, founder, JMK Research, if the government grants solar developers another three-to-four-month extension, an estimated 4 gigawatt (GW) of solar and wind projects with planned commissioning in 2021 will be delayed and will be expected to get commissioned in 2022.
“There will again be a delay in the project commissioning schedule for utility-scale solar projects because of lack of labor, and delay in equipment supply due to lockdown in different states… The rooftop market will again face payment issues for open projects with the uncertainty looming over full or partial closure of manufacturing and business units which might also add to liquidity crunch woes,” said Gulia.
Solar developers have already asked for a three-to-four-month blanket extension from the Ministry of New and Renewable Energy (MNRE) owing to disruptions in labor and supply chain as a result of the ongoing wave of COVID-19 infections.
Earlier this month, the solar industry body National Solar Energy Federation of India (NSEFI), had requested a three-month blanket extension over-scheduled commissioning date and for financial closure on the execution of the current projects until stability in module prices and steel prices was observed.
“Given the surge, availability of manpower, managing supply chain logistics, etc, is becoming a severe challenge, akin to the first wave. Since the solar industry is already bearing the delayed deliveries, delayed BIS approvals, due to COVID-19 induced slowdowns leading to financial hardships for developers,” the NSEFI letter had stated in its letter.
The ministry had clarified through an order issued on 30 March that the total extension provided by implementing agencies on account of Covid-19 should in no case be more than 6 months including the 5-month blanket extension given in August 2020. In case an extension beyond 6-months is required, the agency will have to justify it to MNRE.
In August 2020, the renewable energy ministry had granted a five-month blanket extension to all ongoing projects to deal with disruptions caused by the lockdown.
Industry analysts said that every aspect of project development activity including site preparation, engineering, financing, procurement, and construction is being hit because of the far greater spread of infection.
“The situation is really grim and significantly worse than last year… The conservative view is that the slowdown will amount to a loss of 3-4 months of business activity. Profitability across the value chain is also coming under severe pressure due to additional costs and delays,” said Vinay Rustagi, managing director at renewable energy consultancy Bridge to India.
He added that things might worsen further depending on when the pandemic starts coming under control. Regarding discoms, Vibhuti Garg, energy economist, Lead India, Institute for Energy Economics and Financial Analysis (IEEFA) told ETEnergyWorld that they will struggle to make payments to RE generators and like last time, the government will have to pump in more money to address the issue.
She also said that the ongoing situation might also hit the government’s objective of promoting domestic manufacturing at this stage.
While the Central government has requested states not to impose full lockdown but containment of zones, the given pace at which the infection is spreading this time states are left with no option but to announce lockdowns resulting in a reverse migration of labourers which has come as a grim reminder of previous year conditions.
“Lot of migrant labourers have started going back to their hometowns… Renewable power projects in such states will suffer and the government will hav2e to give another extension and not impose any penalty for not delivering projects on time,” said Garg.
According to industry executives, they are either not facing any crisis at present caused by reverse migration of labour or expect a rather lower level of impact in the future.
“With the recent surge in COVID-19 cases, we expect a recurrence of last year’s issue with the migration of labourers, albeit, at a potentially lower level. So far, we do not anticipate any adverse impact on any of our current operations, as we maintained our daily operations during the previous surge of COVID cases,” said Srivatsan Iyer, chief executive officer, Hero Future Energies.
He said that at their Bhadla solar park project site in Rajasthan, they have been mobilizing efforts to facilitate a safe working environment for onsite employees and contract workers.
“The vaccination drive for all employees is underway, and for contract, labourers have been recently initiated at a few of our operational sites, and we aim to cover all our sites at the earliest,” added Iyer.
However, Gautam Solar, a Delhi-based solar manufacturer of components for the entire value chain of distributed solar, they are currently not facing any migration crisis.
“Very recently, we have doubled our production capacity at our Haridwar facility. Since we’re not facing any lack of demand, we don’t have to think about pay cuts or layoffs that trigger the migration of workers, especially those working on daily wages,” said Gautam Mohanka, managing director, Gautam Solar.
Since last year, India’s renewable energy sector has seen a heightened pace of merger and acquisition (M&A) activity despite the coronavirus pandemic that has taken a toll on the economy.
In November 2020, ETEnergyWorld in its report had said that M&A transactions of about $2 billion took place in 2020, a 75 percent jump from transaction volumes estimated at $1.2 billion in 2019, according to one estimate. While the total deal value of transactions in 2020 stood at about $4 billion, according to another estimate.
According to analysts, this year will not be any different and the sector would continue to see a high level of M&A and funding activity despite COVID-19 because of the global thrust on renewables, investors’ comfort in bankable power purchase agreements, and India’s experience in setting up sizable projects.
“We continue to see interest from three categories of investors – purely financial investors, global IPPs and utilities and oil and gas majors. Deals are getting consummated across the business lifecycle — from investments in greenfield projects to acquisition of commissioned assets to the funding of growth platforms,” said Srishti Ahuja, Partner – strategy and transactions, power and utilities practice, EY India.
She added that the sector has also seen its first special purpose acquisition company transaction, a series of successful green bonds, and a variety of new deal structures, though a successful InvIT still eludes the sector.
Source: Economic Times