Developers shy away from SECI’s 250 MW tender in Gujarat

SECI has completed auctions of 160 MW capacity of projects to be developed in the Charanka solar park in Gujarat under the viability gap funding (VGF) scheme. The original tender of 250 MW was broken down into five projects of 40 MW each and two projects of 25 MW but bids were received for just four projects of 40 MW. Auctions for other projects may now be completed at a later date. Most private developers steered clear of this Gujarat tender due to the extremely high solar park charge – INR 9.6 million per MW – equivalent to the VGF ceiling of INR 10 million/MW and more than double the solar park charges in Andhra Pradesh. This effectively means that even if a developer got the maximum VGF of INR 10 million/MW, it would spend the entire VGF on paying for solar park charges. The combination of VGF plus fixed tariff of INR 4.43/kWh as payable by SECI was not seen as attractive by most developers.

Bidding for this tender has been delayed for over 10 months as developers have been reluctant to participate
Considering that Gujarat has one of the highest RPO requirements in the country and its Discoms are most bankable amongst peers, the state must aim to add more capacity
There is a need for the state to revisit its high solar park charges but short-term project development opportunities in the state are very limited

It is the first such tender where SECI proposes to disburse 100% VGF on commissioning of the project instead of tranche wise disbursement over 6 years. This move is very positive for developers but still failed to generate enough interest in the tender.

The online auction saw projects being allocated to Gujarat Industries Power Co. Ltd (80 MW, VGF of INR 6.97 million/MW), Orange Renewables (40 MW, INR 7.02 million/MW) and Mahindra Renewables (40 MW, INR 7.77 million/MW). The bids are relatively high compared to recent SECI allocations in Chhattisgarh, Karnataka and Andhra Pradesh but are very aggressive in our view considering the high solar park charges.

Gujarat was one of the first movers in the solar sector with a 1,000 MW allocation in 2010 under the feed in tariff scheme. But the state has seen very little solar action since then due to surplus power availability. Gujarat’s 2022 solar RPO target of 8 GW and high DISCOM ratings should provide an attractive market for solar project developers. But we expect few short-term opportunities for the sector unless there is a very strong demand upturn.