Solar Tariff Bids In India Could Fall To New Low With Latest 500 Megawatt Tender

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Originally published on CleanTechies.

After failing to attract enough bids for the 500 megawatt solar tender in October of last year, the state’s power utility has issued yet another tender for the same capacity.

Tamil Nadu Generation and Distribution Corporation (TANGEDCO) has issued a request for selection (RfS) document for auction and allocation of 500 megawatts of solar capacity. Prospective project developers can submit their bids by February 10th, 2017.

The utility issued a tender in October of 2016 which saw a measly response of just 117 megawatts. There are some significant changes in this fresh tender.

Project developers will now be able to bid for up to a maximum capacity of 500 megawatts, so a single company could secure the entire tender capacity. In the earlier tender, the maximum bid size was only 50 megawatts.

The maximum tariff bid in the October tender was INR 5.10/kWh (7.50¢/kWh) but this threshold has now been reduced to INR 4.50/kWh (6.60¢/kWh). The lowest tariff bid for utility-scale solar projects in India currently stands at INR 4.34/kWh (6.40¢/kWh) in Rajasthan. Thus, if this new tender is fully subscribed the existing lowest tariff bid record may very well be shattered.

There is a likelihood of developers quoting a new record low tariff bid. Since the Rajasthan tariff bid in January of 2016, several significant developments have taken place that are conducive for a sharp tariff bid cut.

Interest rates have fallen sharply, especially following the demonetization drive of the Indian government in early November 2016. Module prices continue to remain very low. TANGEDCO has signed on to the financial restructuring plan for power utilities, enhancing the prospects of timely payments to project developers. The Indian government has waived off a number of charges for interstate transmission of solar and wind energy. The Ministry of New & Renewable Energy has also directed states to provide ‘must-run’ status to renewable energy projects.

Reprinted with permission.

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