A privately-owned power distribution company in India has launched a tender to set up 300 megawatts of solar power capacity in the western state of Gujarat. The capacity auctioned shall be used by the distribution company to fulfill its Renewable Purchase Obligation (RPO).
Torrent Power, a distribution company serving multiple cities in the state of Gujarat, has issued a tender to procure 300 megawatts of solar power from project developers. As per the tender document, project developers shall be allocated this capacity through a reverse auction conducted online.
Project developers will have 12 months to achieve financial closure for the project, which must then be commissioned within the following nine months. Any delay in the commissioning of the project will result in reduction of tariff at which the project was awarded. For each one day delay in commissioning the tariff shall be reduced by Rs 0.05/kWh (0.07¢/kWh).
Torrent Power would also allow existing projects to participate in this tender if they have not been contracted to supply power elsewhere under a long-term power purchase agreement.
Torrent Power services the cities of Ahmedabad, Gandhinagar, Surat, Dahej SEZ and Dholera SIR in Gujarat, and is among the handful of private companies active in the power distribution business in India. This tender by Torrent Power is perhaps among the first and largest of its kind to be issued by a private sector power distribution company in India.
Other private power distribution companies have been known to either enter into direct power procurement agreements for few months or years to meet their RPO targets, or purchase Renewable Energy Certificates (RECs). This new approach by Torrent Power is reflective of the sharp decline in tariff bids of large-scale solar power projects in India over the last few years. The introduction of forecast and scheduling regulations in the country have also given buyers confidence regarding a fairly accurate estimation of power to be supplied by solar (and wind) power projects.
Other similar power distribution companies like Reliance Infra-owned BSES have entered into power purchase agreements (PPAs) with the Solar Energy Corporation of India (SECI) to avoid direct tenders, and engagement with project developers. SECI auctions large-scale solar and wind power projects across India, successful project developers enter PPAs with SECI which, in turn, sells the this power to interested power distribution companies. This avoids the headache of floating a tender, and organizing an auction.
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