At a recent auction conducted by the Gujarat government for 500 megawatts of solar projects, tariffs have risen slightly from the record lows in India.
The lowest winning bid in the auction was made at a tariff of Rs 2.65/kWh (4.1¢/kWh) for 90 megawatts of capacity by a jewelry firm that intends to diversify into the solar energy sector. This tariff is slightly higher than the previous auction held in Rajasthan in May of this year which saw the record winning bid of Rs 2.44/kWh (3.8¢/kWh).
The second lowest bid was won by state-owned firm Gujarat State Electricity Corporation (GSEC) for 75 megawatts at a tariff of Rs 2.66/kWh and the third lowest by another state-run firm, Gujarat Industries Power Company (GIPCL), which also won 75 megawatts at a tariff of Rs 2.67/kWh.
Azure Power, a major Indian developer, won the balance capacity of 260 MW at a tariff of Rs 2.67/kWh. A total of 14 developers participated in the auction, including major giants Tata Power, ReNew Power, Fortum Solar, Canadian Solar, etc..
Since the solar radiation in Gujarat is lower than Rajasthan, the winning bid at the latest auction held was expected to be higher by industry experts. Also, Chinese modules prices have increased in the last few months. Many experts believe that these tariffs are risky considering various uncertainties like delay in procuring land, currency exchange fluctuations, and more than expected anti-dumping duties.
Another crucial aspect of the auction that contributed towards the 9% jump in tariff bid was that the project developers were not provided land by the state government and will have to scout for land on their own, if not acquired already. The absence of a central government entity like NTPC Limited or Solar Energy Corporation of India may also have played a role in bid appreciation.
Recently, Indian government issued new guidelines for solar power projects wherein unilateral termination or amendment of power purchase agreements (PPAs) by either the developer or the utility is not allowed. PPAs will have a minimum tenure of 25 years to provide stable project finances and reduce tariffs. The minimum penalty of 50% of the tariff will be imposed, if the PPA is arbitrarily terminated by the state or the developer.