Indian Renewable Energy Project Installations fall off a cliff even before COVID Crisis

The first quarter of 2019 has been very bad for the renewable energy industry in India with both wind and solar capacity addition falling off a cliff. The first quarter was when the COVID impact had not really hit the sector hard, though there was some impact due to the supply chain issues with Chinese factories not selling solar panels as a large part of China was under lockdown.

Solar project capacity additions fell a whopping 67% to just 715 MW in the first quarter while wind energy capacity also fell at a similar rate of 65% to 328 MW which means that the overall capacity additions were just 1 GW in the first quarter. To reach a target of 175 GW of RE capacity up from around 70 GW now, India needs to do around 30 GW a year which means 7.5 GW a quarter. Given the 1 GW additions, this means that India is only doing 15% of the target. While solar energy capacity fall can be explained by the lack of solar panels coming from China, it is difficult to explain the fall in wind energy additions given that most of the wind equipment such as the turbines, inverters, etc. are made in India only.

The second and third quarters are expected to be even worse in 2020 with the national lockdown making it very difficult for the companies to move the equipment or do the construction of the projects. Some companies are already using this crisis to wiggle out of the irrationally bid contracts they had done earlier with state-owned organizations.

The key structural problem for the renewable energy industry is not so much as the operational issues of getting land and transmission which gets resolved with time, but more to do with the overall lacunae in the power industry. The distribution sector is a mess and the overall power generation is at a large surplus with the PLFs of the coal-powered thermal plants falling to new lows every day. While the government wants to privatize the distribution sector and reform the state-owned distribution companies, that will take time to get executed, if it gets done at all given the morass that the Indian governance systems are! The renewable energy industry will not be able to cut itself from the overall power industry and economy and continue to face the same issues and pain that is being felt by all power sector stakeholders.