India’s National Thermal Power Corporation had invited bids for 10 separate 50 MW solar PV projects under the Phase-II, Batch-II, Tranche-I of National Solar Mission in Andhra Pradesh, each of which are to be developed in the Ghani Solar Park, Kurnool District of the state.
Bids were submitted last week, and as per Bridge To India, the call has been oversubscribed by 10 times, with a total of 30 developers in the foray.
The tender marks a number of firsts in the Indian solar market.
To begin with, this is the first round of National Solar Mission (NSM) bids since the Modi government took charge in May 2014. The government has already ramped up India’s solar power capacity target under NSM by five times to achieve 100 GW by 2022.
Also, this is for the first time that bids have been called for projects to be set up in solar parks. Under the solar parks policy as released by Ministry of New and Renewable Energy (MNRE), solar parks will provide specialized services to attract investment from private developers. This would include levelled land, roads, water, security, and communication, among other things — each of which would have otherwise entailed additional costs for the developers had they been on their own. These benefits will come at a price, but they will greatly help in reducing the risk and gestation period of the projects.
According to Bridge To India, the investor interest in the current round can be gauged from the fact that six developers, including SunEdison, Adani, Rattan India, Reliance, SoftBank and Energon, have bid for the entire 500 MW capacity! Bridge to India also note that this is the first time that an online open bidding will be tried out in the Indian solar market. If similar bids in India for telecom spectrum and coal mine allocation are any indicators, this mechanism will lead to ruthless competition.
In the recent solar bids in Madhya Pradesh, Telangana, and Punjab, solar tariffs have continued to fall at a rate faster than what experts consider viable. The lowest standing tariff at the moment is ₹5.051/kWh ($0.08/kWh), offered by SkyPower to the state-owned Madhya Pradesh Power Management Company Limited in Madhya Pradesh. In fact, this is lower than the levelised tariff of ₹5.79/kWh ($0.08/kWh) under the recently approved Viability Gap Funding framework. The point hits harder when noting that all the projects in Punjab (link above) were allocated at a tariff less than ₹6.00/kWh ($0.10/kWh)
To draw a comparison with coal-based thermal power plants, which meet bulk of India’s power requirements, the recent coal-based bids for the purchase of thermal power by Andhra Pradesh saw tariffs in the range of ₹4.27-4.98/kWh ($0.07-0.08/kWh). Which is only 1-14% lower than the lowest solar tariff in Madhya Pradesh.
In the current tender in Andhra “aggressive” tariffs of below ₹5/kWh ($0.08/kWh) are expected by many, although Bridge To India says it remains skeptical due to the high solar park infrastructure costs.
Recent speculation posits that the payment security available to NTPC is likely to be extended to the solar companies that sell power to its power trading arm, NTPC Vidyut Vitaran Nigam. If this happens, the reduced risks due to guaranteed payments would further catalyse competition among solar project developers.
Other solar auctions are also said to be attracting a lot of attention, with the 420 MW (6 separate 70 MW projects) tender in Bhadla Solar Park, Rajasthan, also under the NSM phase II, batch II, tranche I, having reportedly already seen 80 developers expressing interest.
Over the last few months, NTPC has issued several large solar PV power tenders.
The company plans to develop 25,000 MW of solar capacity by adding 10,000 MW on its own and by auctioning 15,000 MW capacity addition via NSM to be developed by other solar power developers. NTPC plans to supply electricity from 10,000 MW of solar power capacity that it is setting up on its own at ₹3.20/kWh ($0.05/kWh) by bundling it with the unallocated power to bring tariffs down. In addition, it plans to sell electricity at around ₹5/kWh ($0.08/kWh) for capacity that it is buying on behalf of MNRE. Out of the 15,000 MW to be set up through the auction route, 1650 MW capacity is under the bidding process.
To be fair, the low tariffs are in part helped by capital costs for solar PV plants which have been coming down steadily. A few months back Canadian Solar said that Solar PV costs will continue to fall another 25% over the next three years. This is mainly going to be achieved by improvements in cell efficiency and the output of solar PV modules. Another report by GTM Research expects Balance of System costs to come down by a phenomenal 40% by 2020.
(Please note: Conversion rate used ₹63 = $1)
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