Covid-19 and renewable energies in India – Consequences and challenges of the coronavirus crisis

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published on 15th June 2020

 


The coronavirus has shut down many sectors and markets in almost all countries and has not spared the renewable energy market, either. Therefore, it is all the more important for companies to develop strategies to be able to react adequately to the current situation and to overcome this crisis as smoothly as possible. This article provides an overview of the major problems of the energy market caused by the coronavirus pandemic as well as the prospects of state support.

Current situation:

The year 2019 ended very well for the renewable energy market in India. Especially solar power gained a total of 5550 MW last year:

 

Source: Annual Report 2019-2020 des Ministry of New & Renewable Energy, India: https://mnre.gov.in/

 

Therefore, the year 2020 got off to an even more difficult start with the outbreak of the coronavirus. As a result, on 25 March 2020, a nationwide lockdown for 21 days was ordered in India, which meant that all shops, stores, industries as well as commercial and private facilities had to be closed or people sent home to work in home office. There were a few exceptions, but only for companies and institutions considered „significant”, i.e.: public and private entities and services for electricity generation, transmission and distribution. This included already installed renewable energy systems. However, all projects that had not been put into operation yet and/or still needed to be completed had to be completely closed.

 

On 14 April 2020, Indian Prime Minister Narendra Modi extended the lockdown until 3 May 2020, after several state governments had already announced that they would extend the lockdown statewide until the end of April. In addition, the Ministry of Home Affairs ordered on 15 April 2020 that the lockdown would be relaxed for specific activities. Thus, from 20 April 2020, further activities may be gradually permitted. This includes construction activities in rural areas and construction of all renewable energy projects. Currently, many projects in the preparatory, construction or tender phase are waiting to be resumed from 20 April.

Lack of workers

If the general situation in India improves, construction activities for renewable energy projects will be permitted from 20 April. However, it could happen that no workers will be available at all. Many of them set out in mid-March to reach their home villages yet before the lockdown. The lockdown led to a total production and construction stop. This means that if construction works are to resume on 20 April, workers will have to first return to the project sites. Many of them are currently in other Indian states while there will be no public transport available until the lockdown is lifted. Therefore, either only local workers can be hired or it must be ensured that the other workers reach the construction sites safely. However, It is expected that it will take at least a month before all workers and the full labour force will be available. Even then the safety of the workers will have to be ensured. The infection risk must be kept as low as possible. Thus, it is necessary to distribute face masks and protective clothing, make disinfectants available and carry out temperature controls.

 

Interrupted supply chains

Another problem are interrupted supply chain. The solar sector, in particular, was seriously affected, because many materials used in that sector are imported from China. For the first quarter of 2020, imports were almost completely at a standstill. First, China could not export, and then, after about two months, imports were stopped on the Indian side. When the lockdown was ordered in India, commodities that were still being transported were allowed to be delivered to their destinations. All other deliveries may only be moved again after 20 April. The interruption in the supply chain can lead to delays in project completion. Therefore, the Ministry of New & Renewable Energies („MNRE”) has declared that delays in project completion due to the coronavirus pandemic will be considered force majeure. For this reason, according to MNRE, the deadlines for putting into operation all projects in the construction and planning phase will be extended. The extension will depend on how the coronavirus pandemic further develops. Nevertheless, companies could now find themselves under time pressure. As projects are about to face another stop from July due to the monsoon season in India, companies are pressed for time to compensate for any shortfalls from the first quarter in the second quarter.  


Liquidity bottlenecks

To compensate for liquidity bottlenecks, especially in the case of project developers, the MNRE has introduced various state aid measures in recent weeks. For example, energy network operators were called upon to guarantee uninterrupted payments to green energy producers. For non-green energy, the energy network operators were granted a three-month moratorium. In addition, according to the MNRE, alternative investment funds are to be launched to secure outstanding or pending payments from energy suppliers to project developers. Moreover, a „Project Specific Funding” for manufacturing companies will be introduced and will disburse loans to manufacturing companies. This idea reflects the „Make in India” policy of the Indian government.

 

Conclusion

It remains to be seen whether India will be able to achieve its ambitious goal of 175 GW of installed renewable energy by 2022. The MNRE has recently announced in a webinar that they are convinced that the desired target will be reached. However, the year 2020 will still be problematic for all companies in the renewable energy sector. Therefore, let’s hope that the Indian government will issue further state aid programmes to stimulate the market and attract investment. In the short term, the Indian government should ensure that the workers can safely reach their project sites and resume work. In the long term, further extensions of deadlines for commissioning projects or other financing measures could be issued, especially for smaller project developers.

One thing is already certain: even in these times, the Indian government is clearly betting on its „Make in India” policy and will create further incentives for this particular purpose.

 

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