Coronavirus Could Derail 3 GW Solar PV Capacity In India

• With Chinese solar manufacturers dealing with government restrictions in place due to coronavirus, Indian solar PV project developers could be at the receiving end
• CRISIL says as much as 3 GW capacity worth INR 160 billion could be delayed in achieving scheduled commercial operation date
• Developers may be forced to buy products at a higher price from nations other than China to avoid penalties
• Companies may invoke force majeure clause in their power contracts but it may face regulatory or legal hurdles

With China still being impacted by the deadly coronavirus – even though it is cautiously and slowly returning to work – the Indian solar PV industry may be bracing itself for its side-effects as 3 GW worth of project capacity is currently estimated to be at risk of missing its commercial operation deadline.

According to credit ratings agency CRISIL, this 3 GW capacity is worth as much as INR 160 billion ($2.24 billion) which could be at risk of penalties for missing deadlines in the absence of Chinese suppliers unable to ensure timely deliveries.

Several manufacturers in China have been forced to either completely shut their fabs or bring the production level down. CRISIL points out that even already manufactured modules are stuck in transit and forcing developers to opt for much more expensive modules (at 15% to 20% higher rates) from places outside China if they wish to avoid late commissioning penalties, including downward renegotiation of tariffs. In case of a typical 100 MW PV project – if the commissioning is delayed by more than 90 days, tariffs are renegotiated downwards.

A Force Majeure or an act of God clause may or may not work in these circumstances as it may hit legal and regulatory hurdles, warns CRISIL.

"This puts at risk around 3 GW of solar projects auctioned between July and August 2018, which need to meet their scheduled commercial operating dates (SCODs) by July 2020," said CRISIL Ratings' Senior Director Manish Gupta. "Given that orders for modules are typically placed with a lead time of six months from SCOD, these projects are now in the process of either placing orders or receiving delivery of modules. Hence, any delay at this stage can prove costly."

The fears expressed by CRISIL are somewhat echoed by market intelligence firm PV InfoLink which sees near term logistics and production delays impacting the international PV industry, especially markets like India that are heavily dependent on cheap solar modules from China. However, according to PV InfoLink, on a global level these delays are seen as a temporary impact (see PV InfoLink Sees PV Market Growth Despite Coronavirus).

Indian solar power project developer Azure Power recently said it does not fear delays due to the coronavirus will have any major impact on its plans as it will fall back on the Force Majeure clause for power contracts (see Azure Power Suffers $19 Million Net Loss In Q3/2020).