An industry body in India representing solar power developers made a significant proposal regarding the tariff thresholds for national-level solar power auctions.
National Solar Energy Federation of India (NSEFI) proposed that all national-level solar power auctions in the country have a maximum tariff bid threshold. The industrial body has proposed a maximum threshold of Rs 3.00/kWh (4.37¢/kWh) for auctions conducted by the Solar Energy Corporation of India (SECI) and NTPC Limited.
The proposal, submitted to the Minister for Power and Renewable Energy, calls for bundling of all power contracted through tenders a financial year. This bundled power may then be offered to various states at a uniform tariff rate.
At present, the SECI or NTPC come out with multiple solar power tenders throughout a financial year. Projects allocated in these auctions, and energy generated from these projects, are then offered to interested states at the tariff bids offered by the successful bidders. Thus, it actually depends on the project site (and state) selected by the bidder that finally determines the tariff bid and the tariff that the states would end up paying.
A significant difference in tariffs offered by SECI to states may result in undue confrontation. We recently covered a story regarding the state government of Andhra Pradesh asking project developers to reduce their tariffs voluntarily. The differential tariffs in consecutive auctions are clearly visible in case of wind energy projects.
India has so far conducted 12 wind energy auctions — four by state governments and eight by central government agencies/companies like SECI and NTPC. The lowest tariff bid in the eight central government auctions has ranged between Rs 2.44/kWh (3.55¢/kWh) and Rs 3.46/kWh (5.03¢/kWh) with the average lowest tariff being Rs 2.77/kWh (4.03¢/kWh). Solar power tariffs in similar auctions vary with a similar degree which leads to undesirable consequences, like the ones mentioned above, for the project developers, and the industry as a whole.
The maximum tariff threshold set by SECI for its national-level solar power auctions is well below Rs 3.00/kWh (4.37¢/kWh) so this proposal will not likely have any practical impact on the upcoming auctions. However, it would be interesting to see if any of the states heed to this proposal. States like Gujarat have a history of squashing solar power auctions, citing high tariffs.