Poor Response Forces Indian State To Stop Renewable Auctions

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Lack of adequate and low-priced bids for large-scale solar and wind energy tenders has led the south Indian state of Tamil Nadu to decide not to issue any more tenders. This is a significant decision by one of the largest states in India by installed renewable energy capacity.

The government of Tamil Nadu has decided not to issue any fresh tenders to set up large-scale solar and wind energy projects. The state will instead acquire all solar and wind power through the Solar Energy Corporation of India (SECI). The central government agency issues tenders under the central government policy as well as on behalf of several states and public sector companies.

SECI auctions solar and wind energy projects, and states approach the agency to sign long-term power procurement agreements. Tenders issued by SECI are usually more popular among project developers compared to those issued by state governments or agencies. SECI tenders usually have a payment security clause which allows project developers to avoid dealing with state distribution utilities for payments — state distribution utilities have a poor track record of timely payment against renewable energy generation.

Tamil Nadu had issued a solar and a wind energy tender, each of 500 megawatts capacity, earlier this year. Neither of the two tenders attracted any bids from project developers. The state has the largest wind energy capacity installed in the country, at 9.1 gigawatts, and the fifth-largest solar power installed capacity, at 2.7 gigawatts. Yet, developers either stay away from the state government tenders or quote high tariff bids.

The Tamil Nadu Generation and Distribution Company (TANGEDCO) has had a long reputation of delay in payments to project developers. Further, the state also has the problem of inadequate transmission capacity which forces project developers to stop generation frequently.

Earlier this year Tamil Nadu had issued its latest solar power policy. In this policy the state government increased its installed capacity target from 5 gigawatts to 9 gigawatts by 2023. The state also announced plans to have at least 3.6 gigawatts of solar power capacity through rooftop technology.

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