India’s solar PV rooftop grew by over 84% in the last year, widely exceeding previous growth rates

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Bids were submitted last month for a 500 MW tender under the Viability Gap Funding (VGF) scheme to Solar Energy Corporation of India (SECI). In this tender, 50 MW was reserved for Domestic Content Requirement (DCR) category and remaining 450 MW was for open category. However, the bidder interest in this tender was highly subdued as compared to other recent tenders (refer). The most surprising outcome was that only one participant bid for the 50 MW under DCR category. This tender for DCR category will now be re-opened for bidding.

  • Only one company, Adani, submitted bid for participation in 50 MW DCR category
  • Downward revision of tariff to INR 4.43/kWh is the likely reason for such lower interest
  • We expect low interest for DCR projects in the upcoming tenders in Gujarat, Uttar Pradesh and Andhra Pradesh

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In August 2015, World Trade Organization (WTO) declared that it was illegal for India to impose ‘Domestic Content Requirement’ (DCR) obligation for solar cells and modules. India had appealed against this ruling and continues to allocate projects under the DCR category. However, India has now offered a compromise to the US by removing DCR requirements for private sector projects only (the requirement is proposed to continue for projects developed by public sector entities). Indian government believes that this formula complies with WTO guidelines.

  • DCR accounts for less than 5% of total module demand in the Indian solar market
  • DCR has failed to provide long-lasting support to the domestic manufacturing sector
  • A settlement or withdrawal of the WTO case will not substantially affect any US manufacturer, or any manufacturer from any other country for that matter

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Last week, India’s Cabinet Committee on Economic Affairs (CCEA) approved amendments to the National Tariff Policy 2005 (refer). While the policy document has not yet been released, the draft version issued by the Ministry of Power in April 2015 is available (refer). This policy is meant to guide central and state regulators for determining tariffs and other regulations.

  • The policy proposes several reforms for overall health of the power sector but as usual, implementation will be the challenge
  • Promotion of renewable power has been added as a key objective of the policy
  • Implementation of Renewable Energy Generation (RGO) on a cost-plus basis will have serious ramifications for renewable IPPs

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Earlier this month, bids were submitted to Solar Energy Corporation of India (SECI) for 500 MW of solar PV projects in Maharashtra under Viability Gap Funding (VGF) mechanism. Out of the total capacity under this tender, 50 MW of projects are reserved for modules meeting domestic content requirement (DCR). Key highlights of this tender are – minimum project size of 10 MW, no maximum limit, land to be procured by developers, fixed tariff of INR 4.43/kWh and VGF of up to INR 10 million/MW (INR 13.1 million/MW for DCR category) payable in 6 instalments (50% on project COD, followed by 5 annual instalments of 10% each). Bidders will be allocated projects on the basis of most competitive VGF quotes.

The tender has received bids from 14 developers for total capacity of less than 1.8 GW in contrast to NTPC’s recent 500 MW tender in Andhra Pradesh which received bids aggregating 5.5 GW from 30 bidders.

  • MNRE reduced the fixed tariff drastically from INR 5.43/kWh (plus an annual escalation of INR 0.05/kWh for 20 years) in earlier VGF rounds taking note of recent bids of INR 4.63/kWh in Andhra Pradesh just 10 days before bid submission;
  • Bid response is highly subdued as compared to recent allocations by NTPC and some states;
  • We expect similar muted response for SECI’s three upcoming tenders in Uttar Pradesh, Gujarat and Andhra Pradesh.

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