We have covered numerous stories on tenders issued by the Solar Energy Corporation of India and several state governments in India to invite project developers to set up solar power projects at the cheapest tariff possible. In a first, an Indian project developer has issued a tender inviting consumers to purchase solar power.
India’s largest power generation company and government-owned NTPC Limited has issued a tender inviting consumers to purchase solar power. This is a first-of-its-kind tender as to date only consumers (or agencies representing consumers) have issued tenders inviting developers to set up projects. NTPC is reported to have around 1.8 gigawatts of renewable energy capacity operational in India.
NTPC has itself issued several tenders inviting developers to set up large-scale projects at solar power parks. Like its thermal power plants, NTPC looks for distribution utilities that are willing to buy solar power from these solar parks. Power is then sold at the tariff quoted by project developers to the distribution utilities, with NTPC playing little to no part in the transactions.
Neither the central government nor any of the state governments are believed to have issued any policies that allow or promote tenders like the one issued by NTPC. However, the company may have issued it for a couple of reasons.
We covered a story in 2017 regarding the troubles NTPC was having to find a buyer for 250 megawatts of solar power project that it had allocated to a subsidiary of Engie in India. The distribution utilities that were supposed to buy power from the project had refused to signed a PPA with the power plant claiming that they had already contracted sufficient solar power to meet their Renewable Purchase Obligation (RPO). Given the involvement of an international investor in this project the development would surely have caused an embarrassment to NTPC and it may be looking to avoid such situations in the future.
Second, the tender issued is meant only for government-owned and public sector companies. These companies have been mandated by the central government to procure renewable energy to meet RPO targets. This offers NTPC a huge market. According to a Bombay Stock Exchange portal, there are 257 operational public sector companies under the central government. Being a public sector company itself NTPC should not have any major problems in getting into long-term power supply contracts with other public sector companies. Already, companies and entities like Coal India, Indian Railways, and others have announced plans to set up large-scale solar power projects.
The tender could potentially prove highly beneficial to the PSU companies as well, especially those that have no captive generation of their own. Industries and commercial establishments in India are charged the highest electricity tariffs in India in a bid to subsidize the energy consumption in the agriculture sector. With solar power tariffs currently hovering around 2.50-2.70/kWh (3.59¢/kWh-3.88¢/kWh) the end-consumers could make a substantial saving in their energy bills, and NTPC could earn a huge margin on sales.
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