COVID-19: Prolonged lockdown can affect renewable energy sector

Power sector experts are dealing with rising uncertainties in the wake of the novel coronavirus disease (COVID-19) outbreak in the country.

The sector has seen some unprecedented developments — closure of commercial and manufacturing industries and people working from home. This has resulted in fall of demand and customer base.

“A sharp fall in power demand led to massive capacity shutdowns. However, renewable energy (RE) capacities saw minimal impact due low share and government interventions,” said Pranav Master, director (Energy), CRISIL Infrastructure Advisory in a webinar organised by the Economic Times.

“However, a prolonged lockdown will affect the generation from RE and increase risk of curtailment,” he added. 

Solar and wind generation rose by 12 per cent year-on-year; implies no or marginal impact of lockdown.
Source: NLDC, RLDCs, CRIS analysis

 “Power demand has reduced by 20-25 per cent, which will affect revenues of distribution companies (discoms) to the tune of $12 billion,” Amit Jain, senior specialist at World Bank, said in a webinar organised by Ernst & Young.

Under such conditions, discoms’ non-payment to the RE power producers will continue to be a serious issue. This will affect the operations of RE plants.

On the developmental side, supply chain disruption has sector has severely affected the sector. According to CRISIL, three-four gigawatt of RE projects will be delayed within next three months and the condition will be exacerbated due to the exodus of labourers.

The financial eco-system for RE projects is disturbing the sector dynamics.

According to Mehta, financing could be curtailed. The current situation could delay financial closure of new projects and defer disbursal. The deferment in loan payments could impact lending.

Currency depreciation could cause a dent in the returns of investment. Consequentially, Foreign Institutional Investors have started retracting, which will affect pipeline of RE projects.

Under such conditions, it is important to take certain steps so that the sector remains floating. The government recently announced certain measures:

• Rescue of RE generators against Uttar Pradesh Power Corp Ltd attempt to declare force majeure (unforeseeable circumstances that prevent someone from fulfilling a contract) by Solar Energy Corp of India
• Instructions to discoms by the Ministry of New and Renewable Energy (MNRE) to clear bills of RE generators despite aberrations caused by COVID-19 as states such as Andhra Pradesh, Madhya Pradesh and Punjab started curtailing power use
• Extension of commissioning deadlines by MNRE under the force majeure clause, as developers continue to face supply-chain constraints

Experts suggested adopting an integrated approach of forecasting of load, new technologies and inter-state transmission corridors to ensure sustained growth.

It is high time that financing is facilitated and lenders’ confidence rebuilt by providing clarity in a long-term policy. More importantly, to absorb such shocks better, India has to re-look its solar manufacturing sector.