India controls solar tenders amidst struggle to retain investor interest

It requested the maximum solar tariff to be set at $0.036/kWh after Sprng Energy made a record-low bid.

Just after Sprng Energy won NTPC’s 2GW solar auction with one of the lowest bids in Indian power auction history at $0.037/kWh, Mercom India reports that the Ministry of New and Renewable Energy has requested to set the maximum solar tariff at just $0.036/kWh, that is if it doesn’t take into account its freshly implemented solar duty. It wants to set the maximum tariff for bidders at $0.038/kWh if the safeguard duty is levied.

It also requested future solar bids to be set in lot sizes of 1,200MW with no upper cap and minimum bid size is to be set at 50MW. “The reason behind setting the lot sizes at 1,200MW is to
generate more competition as it has been observed that the recent large auctions have not generated sufficient interest or competitive tariffs to satisfy the government agencies,” said Priya Sanjay of Mercom India.

Pricing conundrum
IHS Markit research & analysis manager Josefin Berg previously said that India risks aggravating the oversupply of PV modules, the rise of PV module prices, and a brief halt in project development. “By raising module prices, the measure also takes the air out of India’s trend of declining bids in PV tenders, which has made PV one of the cheaper sources of new electricity in the country,” she said.

The measure, therefore, risks delaying new tenders as the off-takers seek to attain the lowest possible bids, Berg said. “Such delays would mainly impact installations in late 2019 and 2020.” It is also unclear if all Indian manufacturers will benefit from the trade measure, as many operate out of Special Economic Zones, wherein duties are applicable.

Approximately 4GW of solar auctions have been already cancelled in the recent months. Moreover, three large auctions have been terminated recently. This was recently illustrated by Solar Energy Corporation of India’s (SECI) cancellation of 2.4GW out of a 3GW Interstate Transmission System (ISTS) connected solar auction held in July 2018.

It could take at least a month for the issue to be settled, Berg concludes. “Even if favourable for on-going projects, the delay in procurement may cause projects to spill over to 2019,” she said.