As coronavirus swept across the length and breadth of every country, governments all over locked their economies and restricted the movement of people. Businesses remained shut and no travel was permitted.
In an exclusive webinar organized by The Blue Circle on ‘Green Energy: Covid-19 Impact & Way Forward’, prominent leaders – Vipul Tuli (MD, Sembcorp Energy India & Chair, FICCI Power Committee), Christopher Beaton (Senior Policy Advisor & Lead, India Program, International Institute for Sustainable Development), Gagan Sidhu (Adviser- Centre for Energy Finance, Council on Energy, Environment and Water), Neeraj Sharma (President and MD, Wartsila India), Ashish Khanna (President, Tata Power, CEO & MD, Tata Power Solar Systems), and Pavan Choudary (Author, CEO and Public Intellectual), discuss the impact of Covid-19 on the renewable energy sector and the way forward.
The Covid Effect
The world resources institute has predicted a 6% fall in global energy use in 2020. It said that the renewable energy industry would not be spared too. In India, power demand fell sharply by about 20% – coal demand fell by 26% and renewables, about 10%.
What is remarkable however is the renewable sector showed resilience. “Within 3-4 days every site producing power across the country was back in action despite all obstacles with new safety and isolation procedures,” said Vipul Tuli, “And despite malls, most offices and industrial units shut, demand has returned to within 5-10% of normal.”
Tailwind and Headwinds
India had two successful tenders in a couple of weeks after the lockdown was imposed. One was a 2 GW Tender, other was a 400 MW round a clock tender. “One of the biggest tailwinds that I saw was that despite the disruption, despite the fact that power demand fell so steeply, investors felt quite confident. The investors believe that this sector provides them with some protection against volatility and they are willing to accept lower yield,” said Gagan Sidhu.
However, one of the big headwinds is how are the renewable energy projects going to get financed in such uncertain times. Though the repo rate is at a historic low of 4% today, challenges on the availability of capital remain. “The Achilles heel of the sector, its financial and liquidity position, has been exposed,” said Tuli.
Banking has exposure to 5.5 lakh crore to power, the top two NBFCs have similar exposure. When we talk about significant capacities that need to be funded, it’s questionable if banking and NBFC have the headroom to fund that additional capacity. Sidhu suggested that the government can try to subsidize the recycling of debt by the local capital market.
Clogged Supply Chains
A lot of countries like the U.S and Australia depend on China for renewable components and raw materials. Other Asian countries like Vietnam also source their raw material from China.
For India, 88% of its solar modules import comes from China.
Supply chain disruption poses a risk especially to investments made by individuals and small to medium-sized enterprises in renewable energy applications, such as distributed PV, solar thermal water heaters, heat pumps, and biomass boilers. These investments run a higher risk of delay or even cancellation compared to large-scale projects.
Developers and contractors are asking for long buffer project times and delays for new projects as accepting the deliveries and installing the components remain a question.
The government needs to have a telescopic view
While Tuli appreciated the Indian government’s efforts and said that the direct focus on discoms is a step in the right direction, Neeraj Sharma was pragmatic. “The government has to play a proactive role in giving us the big picture and direction,” he said.
“As we go towards 100% renewable, how are we going to integrate other power production?” asked Sharma. Our technology doesn’t allow us a much flexible generation. He urged the government to focus on how to promote the ancillary service market, create grid stability, and improve the quality of power.
“If India needs to integrate renewable energy into its system, someone has to pay a heavy cost for integration. The government needs to ensure the transition happens in a socially responsible manner,” added Christopher Beaton.
The big issue is who bears the cost. Tuli suggested that it should be accounted for in the books of central and state governments, and the people to some extent. This would reduce power generators’ and discoms’ burden and would allow for bigger pockets.
Renewable energy: A long term goal
At least half of India’s power will originate from coal by 2030. Thus, we need to tidy up coal, not wish it away. Possibly India could make new, effective coal plants before dirtier plants arrive at their finish-of-life.
At the current level, power as a source of energy is less than 30%. By 2050, we are expecting it to reach 86%. We should look at this picture in the long term. “Renewable is a marathon, not a 100 m dash. There were players who were making aggressive assumptions and any change in the parameters in those assumptions had a major impact on the viability of those projects or investments,” said Ashish Khanna. “When hunger will strike, climate will again take a backseat and economic elements will come in front. In the long term it is about being sustainable. ”
“The most important thing is making sure that in the short term we are not making permanent changes to policies hastily. We need the right tools for the right term period. The trends in G20 countries do not look great. Majority of approved government stimulus in these countries is focussed on fossil fuel. Countries are weakening the environmental norms e. g . South Africa has halved the stringency of sulphur dioxide standards. ” cautioned Beaton.
Make in India
The Indian government has pushed for ‘Make in India’, an initiative to boost manufacturing and create jobs.
Taking the example of wind energy, Vipul Tuli said , “We have some of the largest and competent wind manufacturers who have delivered energy in the last 10-15 years. 5 out of 6 are bankrupt or nearly bankrupt today. Let’s make sure that we have learned the lessons of the past before we jump into 100% Make in India for solar.”
He also urged the government to change bureaucratic mindset and work towards nurturing relationships with investors. “We cannot go ahead with the mindset of rolling out red carpet till the investor comes but after the investor comes, leave him to survive on his own. There are probably 3000 industrial zones in our country, not more than 30% are successful. If we can get this thinking in, it will wash away all arguments around unemployment, supply chain and investment.“
According to the in-house survey by The Blue Circle more than 90 % of the webinar attendees agreed that renewable energy will give a bigger boost to the economy and employment.
Covid hit some communities deepest and those are the communities that renewables come to rescue, poor and the old. “Renewable has the potential to provide a livelihood for the migrant workers who have gone back home. The poor get employment opportunities and the old get exposure to less pollution,” said Pavan Choudary.
- None Found