Sterling and Wilson, one of the leading India-based engineering, procurement and construction (EPC) players in the power sector, recently issued a statement that the spread of coronavirus in China will have an impact on its business in the short-term. Some of the company’s critical suppliers have stopped production, which is expected to commence only by the end of February, says GlobalData, a leading data and analytics company.

However, the commencement of the production will depend on the situation prevailing at that point of time. This echoes the sentiments of other players too in the power industry.

Harminder Singh, Director of Power at GlobalData comments: “China plays a key role in the global supply chain of power equipment. It is not only a major equipment supplier; it also supplies key components to other countries. The country contributes close to 45% of the total crystalline solar PV module production in the world and a similar level of share in steam turbines.

“The share of the country in the wind turbines market is also 40%. So, the repercussions of delays in production of these components in the country will be felt across the world.”

The conventional power industry will not be significantly impacted as the gestation periods are long. However, for renewable energy projects such as solar, there are timelines that need to be met in order to get incentives such as feed-in-tariffs from the government.

Projects that are awarded through competitive auctions also have obligations to be completed within specified timelines. Such projects would suffer if suppliers are not able to meet the delivery schedules. There are penalty clauses in the power purchase agreements (PPAs) that could be invoked in cases of project delays.   

Singh concludes: “There is not much that companies can do in the short term to mitigate the risk emerging from the current situation in China. Given the scale of operations and the intertwined supply chains in the current global business scenario, it will be a wait and watch situation for most players impacted by the disruption.”