The Southern Indian state of Andhra Pradesh auctioned 6.4 gigawatts of solar power capacity under a recent tender. The high response to the tender came as a surprise to many industry watchers.
Andhra Pradesh recently auctioned 6.4 gigawatts of solar power capacity meant to supply electricity to farmers. The tender offered developers a capacity of 300 megawatts and more in multiple solar power parks spread across the state.
Participation in the tender was highly concentrated, with only five developers submitting bids to develop projects. However, the tender was oversubscribed by 2.3 times as developers offered to set up as much as 14.3 gigawatts of capacity.
Adani Green Energy, one of India’s leading renewable energy companies, submitted bids to develop a 3 gigawatt capacity. A little-known local EPC contractor secured rights to develop 2.2 gigawatts. India’s largest power generation company — NTPC — secured 600 megawatts, while Torrent Power, a private company in the power sector, and HES Infra, a construction company, each bid for 300 megawatts.
These companies submitted tariff bids of Rs 2.47 to 2.58 (3.52¢ to 3.68¢) per kilowatt-hour.
All power generated from these projects will be used to meet agricultural demand in the state. The duration of power purchase agreements for these projects will be 30 years compared to the usual 25 years for projects of similar size.
Most leading developers stayed away from this tender given the recent experience with the Andhra Pradesh government. The state had refused to pay developers at the tariff agreed upon in power purchase agreements citing the decline in consequent tenders. This affected around 7.5 gigawatts of operational and under-construction solar and wind power projects.
The lack of trust towards the state government is being seen as one of the reasons for many developers staying away from the auction and bidders quoting tariffs at a premium of up to 29% to recent lows discovered in auctions of other states.