Another Indian state has cancelled a large solar power tender citing high tariff bids quoted by project developers. This time the state of Uttar Pradesh has announced that it will annul the results of a 1 gigawatt auction that was concluded last month.
The Uttar Pradesh New and Renewable Energy Development Agency (UPNEDA) had offered project developers a total of 1 gigawatt solar power capacity earlier this year. The tender did not garner as much interest from project developers as tender of some other states, or those issued by central agencies do. Uttar Pradesh is not among the leaders in India’s solar power market and has been rather late in development of supportive infrastructure for solar power projects.
The lowest bid was placed by Adani Green Energy which proposed to developed 250 megawatts of capacity at Rs 3.48/kWh. Acme Solar placed bids to develop 300 megawatts of capacity at Rs 3.48/kWh to Rs 3.55/kWh. Azure Power placed bid for 160 megawatts of capacity at Rs 3.55/kWh. A few other project developers, including Eden Renewable, Hero Future Energies, and Canadian Solar, also placed bids around Rs 3.55/kWh.
The lowest tariff bid was Rs 3.48/kWh, while the highest bid was Rs 3.55/kWh. The lowest bid in this tender was at a premium of 42.6% to the lowest-ever tariff bid placed for any solar power project in India. The reason for the high tariff bids is the limited solar radiation that Uttar Pradesh receives in comparison to states like Rajasthan and several southern states in India.
According to Mercom India, the UPNEDA officials had expected a stiff competition, and a tariff bid range of Rs 3.10 to Rs 3.15/kWh. But the actual bids were much higher than the expectations, leading to the cancellation of the capacity allotment to developers.
The UPNEDA has decided to split the annulled 1 gigawatt tender into two, of 500 megawatt each. The first of these tenders has already been launched.
State solar tenders usually receive bids at a substantial premium to the tender issued by central agencies, like Solar Energy Corporation of India and NTPC Limited. Tenders issued by central agencies usually have a clause for payment security which is a risk hedge for developers when they quote tariff bids. In addition to payment security, developers also look for the financial health of the agency buying power, cost and availability of land for project development, solar radiation, among others.
Around a year back, Uttar Pradesh had asked several project developers to voluntarily reduce their tariff bids in an auction held in 2015. Tariff bids in that auction was as high as Rs 8.60/kWh.
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