The Covid-19 pandemic has brought the world to a standstill, affecting almost all sectors. With Unlock 4.0, any industry can now manage the damage caused by the lock based on their skills and needs when things calm down. The solar sector was hard hit in these unprecedented times. There is a lot of uncertainty in the industry at the moment and the sector should recover after this crisis ends. This will determine how quickly we reach our renewable energy target of 100 GW by 2022. The solar roof sector is badly affected for two reasons: high labor costs and reliance on the commercial and industrial sectors. The demand for electricity in India has fallen by 25 to 30 percent today. This drop in demand, with reduced collection and slow recovery, will already be detrimental to already stressed distributors by creating a liquidity gap of around Rs 40,000. Industries have very high fixed costs in relation to their monthly electricity bills. Solar energy can come to your rescue by cutting your bills by up to 80 percent. The reduction depends on factors such as the load and consumption profile; state policy; Technology and design used. With tiered electricity costs of less than Rs 2 per kilowatt hour, companies face the challenge of investing in solar in-site and off-site solutions. A company can cut its electricity bill by up to 90 percent by installing a solar power plant on site on the roof or on the ground floor. This is the most preferred type of installation because the asset is synchronized live with the loads and the facility is isolated from policy variability. The financial execution modes are either the Capex route (self-investment) or the Opex route (third-party investment). Banks and credit institutions have taken note of the reliability of the solar energy and the high returns on the project. They have therefore started to aggressively finance solar projects for their own use. Under the Opex model, a third party sells electricity at a pre-agreed tariff that is tied to a power purchase agreement, usually with a term of 12 to 15 years. There is also an external mode where a solar power plant is built in a remote location and the electricity is transferred to the branch location. Regardless of which technical or financial model has been chosen by an industry, investing in solar systems is a breeze. In most cases, investing in a solar project will bring an industry higher returns than the existing business.
Effects of Covid-19
Due to Covid-19 and nationwide lockdown, ongoing solar projects have been halted, utilities are facing disruption, and developers are concerned about the delays their projects are facing due to the slowdown in production in China. Even today, the solar industry still depends on China for around 80 percent of its solar requirements. The imports of solar power systems were down by around 70 percent in January 2020 compared to January 2019. The players in the sector had to accept delays in the procurement of modules, solar cells and other components due to covid-19. About 85 percent of the solar workforce are migrants, and many of them have returned to their villages and will likely be away for some time before the lockdown is completely lifted.
Challenges after locking
Once the lockdown is over, the availability of spare parts and manpower for maintenance will have a significant impact on the performance of solar systems. As the high wind season approaches in the coming months, scheduled maintenance will also be a challenge. Execution work on new projects has come to a standstill. Even if the force majeure conditions allow an extension for the contract period; It will take some time for migrant workers to reach the project locations. In contrast to other infrastructure projects, solar energy projects hardly take 6 to 9 months once land and evacuation systems are available. This is only possible if a large number of workers are employed for a shorter period of time.
Role of solar in post-Covid economic recovery
The expansion of solar capacity in India in the first quarter of 2020 was the lowest since the fourth quarter of 2016. According to a recent report by the International Energy Agency (IEA), renewable energies are not immune to the COVID-19 crisis, but they are more resilient than other fuels. The agency noted that the solar space is expected to pick up again in 2021 as projects that are currently delayed are going back online. 2021 is expected to achieve the same level of renewable capacity expansion globally as in 2019. Renewable energies, especially the solar sector, are at the forefront of this opportunity as they provide cheaper and cleaner electricity – with the right legal and political framework. This could be the right way to go compared to traditional electricity.
In addition, the number of direct and indirect jobs created by building and maintaining renewable energy will be an added benefit after the lockdown is lifted to revive the economy if rising unemployment is an issue. Renewable energies, especially from solar energy, have long since passed grid parity and are now cheaper than conventional energy. This economic rationale would itself mean an upswing for renewable energies in the post-COVID-19 phase.
The energy sector is a leading indicator of economic growth. After the lockdown, we expect that a lot of additional energy capacity will come from renewable energies. Investing in renewable energy is therefore a precursor to the health of the economy. This will add value for the revitalization of the economy. This pandemic is also a lesson for companies not to rely on just one country for their technical equipment and to focus on greater diversification. However, the construction phase of solar is very labor intensive and to some extent the operation and maintenance of solar creates significant jobs in our communities.
Hence, job security and job creation are likely to be the top drivers in determining how India can tackle the post-COVID-19 economic slowdown. The operation and maintenance of solar systems creates part-time employment opportunities for several thousand people from remote and rural areas.
The role of government in revitalizing the post-Covid economy
The Indian government has also taken many proactive fiscal measures, such as lowering the repo rate to 4.4 percent, a three-month moratorium on principal and interest repayments on fixed-term loan and working capital facilities to revitalize the solar industry. The solar industry is asking the government to take a break so it can stay afloat during this economic crisis and work towards meeting the country’s long-term renewable energy goals. A strong and strategic resuscitation plan is very
An important contribution for the industry to achieve its goals on time.
A more targeted introduction of guidelines is to take place in order to support decentralized projects such as solar roofs and to create incentives for the domestic production of solar cells, modules and other devices. This crisis offers the government an opportunity to lead by example and create a recovery plan that is environmentally friendly, efficient and progressive. Recently, the International Renewable Energy Agency (IRENA) coalition of action wrote to governments recommending how governments can ensure a rapid and sustainable economic recovery of the renewable energy sector that is in line with climate and sustainability goals. They stressed the role renewable energy could play in these strategies by providing reliable, easy to mobilize and inexpensive electricity for essential services.
After Covid, more financial support is needed to boost local production as India relies on China for about 80 percent of its solar inputs. The center should provide more financial support to the solar energy sector and the decentralized model of solar energy development that does not endanger grasslands and desert ecosystems. Government-backed financial institutions need to take a step forward and take the lead in increasing long-term investments in India’s solar space.
[This piece was authored by Puneet Goyal, Co-Founder of SunAlpha Energy]
[Disclaimer: The views expressed are solely of the author and ETEnergyworld.com does not necessarily subscribe to it. ETEnergyworld.com shall not be responsible for any damage caused to any person/organisation directly or indirectly.]