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					</table>The Indian rupee&#8217;s recent fall against the U.S. dollar has added to the domestic renewable industry&#8217;s woes which is already struggling with rising prices, duties, and supply chain issues.
The rupee has been trading above ₹79 to the dollar, thanks to the surging dollar, rising imports, and foreign portfolio investors withdrawing money from emerging markets, including India.
Renewable energy project developers say the rupee depreciation will translate into a sharp jump in EPC (engineering, procurement, and construction) costs, leading to delays in project execution. Even a slight increase in the rupee-dollar exchange rate leads to a consequent increase in project costs.
Industry insiders told Mercom that the impact on EPC costs would be much more because of the significant exchange rate variation between the time of bidding and the finalization of the solar module supply agreement.
Goutam Samanta, Head, PV technology, Juniper Green Energy, said solar power developers would suffer an overall reduction in already modest margins. &#8220;Moreover, a major part of the project cost is incurred in dollars, whereas the revenue is derived in rupees. This exposes the bidder to the risk of inflation in project cost due to the fluctuating currency rates.&#8221;
Avinash Hiranandani, CEO &amp; MD, Renewsys, concurs. &#8220;The depreciation will impact the entire solar value chain.&#8221;
The rupee value has depreciated around 13% in a staggered manner in the last four years. Indian solar manufacturers are trying to cope with the consequent impact on working capital. As Harsh Jain, Director, Citizen Solar, put it, &#8220;Along with the Indian rupee, the Chinese RMB has also depreciated. So, for a net import country like ours, along with the rupee, there is added price pressure from China. It is tough with BCD (basic customs duty) added to the mix.&#8221;
Industry bodies have in the past voiced concerns over the rupee&#8217;s volatility. In 2021, the National Solar Federation of India <a href="https://mercomindia.com/usd-inr-exchange-rate-rtc-renewable-bid-nsefi/" target="_blank" rel="noopener">wrote</a> to the Ministry of Power to consider the U.S. dollar rate escalation and its impact on bids to procure power round-the-clock from renewable energy sources. It had requested the ministry to amend the guidelines to allow escalation indices used for calculating levelized tariffs to be converted to rupees based on the exchange rate for that year.
It is not that the rupee depreciation alone is to blame. According to Jain, polysilicon prices have increased by 3-4%, leading to wafer/cell price hikes in the last three months. On the other hand, prices of aluminum and copper (copper ribbon used in solar panels) have crashed in the last few weeks.
&#8220;Recession has been looming in the background. The private sector demand has come down. The sentiment is changing, and customers prefer to wait since solar is a luxury at this point,&#8221; Jain said.
Waiting for the international market to ease is one way to cope with the contingency. Otherwise, given the short timeframe between negotiations and delivery, any cost impact will be passed on to the consumer. &#8220;Since the operating margins are very low, hedging is not possible,&#8221; Hiranandani said.
However, contingencies are not new to solar. Though the industry suffers from such blows, it has recovered with sudden positive changes.
Samanta feels that along with an allowance for hedging, suitable clauses must be incorporated in contracts to account for unpredictable changes in imported items, specifically modules or module balance of systems. &#8220;Higher power rated modules with latest technologies will play an important role in maximizing plant performance (enhancement of power output) and reducing costs.&#8221;
Though there is admittedly a deep worry building, developers and manufacturers are in a wait-and-watch mode for the time being.
The industry experienced a similar <a href="https://mercomindia.com/rupee-depreciation-affects-solar-supply-chain-india/" target="_blank" rel="noopener">situation</a> in 2018, but that phase did not last very long.

Rupee Depreciation Adds to Renewable Energy Sector’s Woes

Imports of solar cells and modules surged by a staggering 1,000% in the second quarter (Q2) of the calendar year (CY) 2021, totaling $762 million (~₹56.6 billion) as <a href="https://mercomindia.com/india-solar-imports-plunged-q2-2020/">compared</a> to $69 million (~₹5.25 billion) during the same period last year which was severely affected by COVID-19.
Quarter-over-quarter (QoQ), Indian solar imports rose by 194% in Q2 2021 <a href="https://mercomindia.com/solar-imports-up-q1-2021-exports-show-drop-of-19/">compared</a> to $259.5 million (~₹18.9 billion) in Q1 2021.
Similarly, solar exports also rose by 151% to $61 million (~₹4.4 billion)  year-over-year (YoY) in Q2 2021, compared to $24 million (~₹1.8 billion) during the same period last year. Exports surged 113% compared to $29 million (~₹2.08 billion) in Q1 2021.
<a href="https://mercomindia.com/wp-content/uploads/2021/08/India-Solar-Cell-and-Module-Quarterly-Import-Export-Activity-M-1.png"><img loading="lazy" decoding="async" class="aligncenter size-full wp-image-28278" src="https://mercomindia.com/wp-content/uploads/2021/08/India-Solar-Cell-and-Module-Quarterly-Import-Export-Activity-M-1.png" alt="India Solar Cell and Module Quarterly Import-Export Activity ($M)" width="548" height="354" srcset="https://mercomindia.s3.ap-south-1.amazonaws.com/wp-content/uploads/2021/08/India-Solar-Cell-and-Module-Quarterly-Import-Export-Activity-M-1.png 548w, https://mercomindia.s3.ap-south-1.amazonaws.com/wp-content/uploads/2021/08/India-Solar-Cell-and-Module-Quarterly-Import-Export-Activity-M-1-300x194.png 300w" sizes="(max-width: 548px) 100vw, 548px" /></a>
This is the first big sign of market recovery and demand bounce back since COVID-19 shut down the markets at the end of March 2020. After the lockdown was announced on March 25th last year, solar construction activity was muted, and solar installations were down to just 3.2 GW in the calendar year 2020.
Activity has picked up this year, and the lockdowns were more targeted and managed by states resulting in a lot less disruption in construction and development activity.
Despite higher component costs and shortages, Imports soared 346% in the first half (1H) of 2021 compared to the 1H 2020, while exports rose by 50% compared to the same period last year. However, compared to pre-pandemic activity in 2019, imports were slightly lower. Exports, on the other hand, were up by 30%.
The effect of ALMM on imports is expected to show up in the second half of the year.
<a href="https://mercomindia.com/wp-content/uploads/2021/08/India-Solar-Cell-and-Module-Import-Export-Activity-M-1H-2018-1H-2021.png"><img loading="lazy" decoding="async" class="aligncenter size-full wp-image-28273" src="https://mercomindia.com/wp-content/uploads/2021/08/India-Solar-Cell-and-Module-Import-Export-Activity-M-1H-2018-1H-2021.png" alt="India Solar Cell and Module Import-Export Activity ($M) 1H 2018 - 1H 2021" width="549" height="377" srcset="https://mercomindia.s3.ap-south-1.amazonaws.com/wp-content/uploads/2021/08/India-Solar-Cell-and-Module-Import-Export-Activity-M-1H-2018-1H-2021.png 549w, https://mercomindia.s3.ap-south-1.amazonaws.com/wp-content/uploads/2021/08/India-Solar-Cell-and-Module-Import-Export-Activity-M-1H-2018-1H-2021-300x206.png 300w" sizes="(max-width: 549px) 100vw, 549px" /></a>
For a more in-depth look at the Exim data by country and charts, subscribe to our quarterly market report – <a href="https://mercomindia.com/product/q2-2019-india-solar-market-update/" target="_blank" rel="noopener">Mercom India Solar Update</a>. Detailed solar import data by component types are available in Mercom’s <a href="https://mercomindia.com/product/india-solar-export-import-tracker/" target="_blank" rel="noopener">India Solar EXIM Tracker</a>.

Indian Solar Imports and Exports in 1H Back to Pre-Pandemic Levels

<a href="https://renewpower.in/" target="_blank" rel="noopener noreferrer">ReNew Power Private Limited</a>, a domestic renewable project developer, has raised $450 million (~₹31.96 billion) through a dollar bond issuance. Mercom confirmed the deal with the parties involved.
The bonds were priced at a coupon rate of 5.875% and will be issued in two tranches with an average maturity of five-and-a-half years.
ReNew intends to use the proceeds from the dollar notes to refinance existing borrowings, including trade credit facilities of the holding company. It added that part of the proceeds of nearly $65 million (~₹4.61 billion) would be used to meet future capital expenditure requirements.
Commenting on the development, D Muthukumaran, the Chief Financial Officer of ReNew Power told Mercom, &#8220;The strong demand for our bonds is a vote for the company’s business strategy and its healthy leverage levels. Interests from big investors from the U.S. and Europe is an added positive indicating availability of sustained long term capital for companies with strong fundamentals like ours.&#8221;
As of December 2019, ReNew Power had a portfolio of over 2 GW of large-scale solar projects in operation in the country, with about 1.7 GW capacity under development, according to <a href="https://mercomindia.com/product/mercoms-india-solar-market-share-tracker/" target="_blank" rel="noopener noreferrer">Mercom India’s Solar Tracker.</a>
According to Mercom India’s <a href="https://mercomindia.com/product/mercom-india-solar-market-leaderboard-1h-2019/" target="_blank" rel="noopener noreferrer">India Market Leaderboard 1H 2019</a>, ReNew Power was second in terms of large-scale solar projects installed in India in the first half of the year with a market share of 12.9%.
Previously, ReNew Power <a href="https://mercomindia.com/renew-power-gs-ec-solar-project-rajasthan/" target="_blank" rel="noopener noreferrer">announced</a> a joint venture partnership with South Korea’s <a href="http://www.gs.co.kr/en" target="_blank" rel="noopener noreferrer">GS E&amp;C</a> for the construction of a 300 MW solar power project in Rajasthan. 
Earlier, the company <a href="https://mercomindia.com/renew-power-300-million-rights-issue/" target="_blank" rel="noopener noreferrer">announced</a> that it raised $300 million through a rights issue. A rights issue is when a company issues its existing shareholders a right to buy additional shares in the company. According to its press statement, Goldman Sachs, Abu Dhabi Investment Authority (ADIA), and Canada Pension Plan Investment Board (CPPIB) subscribed to the issue with each of the shareholders infusing $100 million into it.
In February 2019, ReNew Power <a href="https://mercomindia.com/renew-power-50-mn-in-debt-financing-opic/" target="_blank" rel="noopener noreferrer">raised</a> debt financing of up to $350 million (~₹24.91 billion) from the Overseas Private Investment Corporation (OPIC) to support the construction of new wind and solar power projects in India. In April 2019, the company, through its wholly-owned subsidiary Ostro Energy acquired two subsidiaries of Suzlon Energy; Shreyas Solarfarms Limited (20 MW) and Aalok Solarfarms Limited (10 MW).

Solar Developer ReNew Power Raises $450 Million Through Dollar Bond Issue

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