500 Megawatt Solar Tender In India Scrapped Due To High Tariffs, Poor Response

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The state of Tamil Nadu has scrapped another 500 megawatt solar power tender, citing higher tariff bids and poor response by prospective project developers.

According to media reports, the Tamil Nadu Generation and Distribution Corporation (TANGEDCO) has asked all bidders to collect the financial guarantees they had deposited at the time of the auction. The utility floated a tender of 500 megawatts and opened it in February of this year. The tender received bids from as many as 22 developers but with a cumulative capacity of just 300 megawatts.

This response by developers was is complete contrast to the 10 times over-subscription of the 750 megawatt tender for the Rewa solar park. The lowest bid in the Tamil Nadu tender was 4.40/kWh while that in the Rewa tender was 3.30/kWh (annualized over 25 years).

There were several reasons for the high tariffs quoted for the Tamil Nadu tender, including the condition that developers had to procure land themselves, the lack of transmission infrastructure and apprehensions regarding timely payment. These, and a cash crunch from the demonetization exercise, were also the reasons for scrapping another 500 megawatt tender in Tamil Nadu in November 2016. The utility had received bids for just 122 megawatts in that tender.

Tamil Nadu had to offer significant concessions to the developers in order to attract bids. In July of this year, TANGEDCO received bids for 2.67 gigawatts against the offered capacity of just 1.5 gigawatts.

The utility offered 24 months to project developers to commission projects of a size exceeding 50 megawatts; this is the longest time ever given to commission solar PV power projects in India. Project developers will also be compensated in case of unavailability of transmission infrastructure.

The bids submitted by the participating companies varied from Rs 3.47/kWh (5.4¢kWh) to Rs 4.00kWh (6.2¢/kWh), the maximum allowed bid.

A public sector company, NLC Limited, had offered placed a bid to develop the entire 1.5 gigawatt capacity at Rs 3.97/kWh (6.1¢kWh) but eventually agreed to do it to match the lowest tariff of Rs 3.47kWh (5.4¢/kWh). NLC was finally awarded around 700 megawatts of capacity.

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