Gujarat’s latest utility scale solar tender – 700 MW in Raghanesda solar park – has been undersubscribed by 100 MW. The tender was issued by Gujarat Urja Vikas Nigam, the state DISCOM holding company. Only two of the four bids were received from private companies: Tata Power and Engie (200 MW each). The other two bids were received from state government owned entities – Gujarat Industries Power Company and Gujarat State Electricity Corporation (100 MW each). This tender was reissued after cancellation of a valid completed auction in December 2018 because winning tariffs (INR 2.84 – 2.89/ kWh) were deemed unacceptably high by the state.
Gujarat made two major changes in the revised tender, both positive. The state reduced solar park charges by INR 3.8 million/MW (down 47%) in PV terms over the project life. Second, it gave a tariff guidance to the developers although the specified ceiling tariff of INR 2.70/ kWh is unviable for the chosen site as per our analysis.
It is disappointing that tenders are so routinely undersubscribed and/ or cancelled. The trend owes to an unprecedented surge in tender issuance since early 2018 when MNRE inexplicably suggested that India would aim for 227 GW of renewable energy capacity addition, instead of the 175 GW target, by March 2022. 72.6 GW of utility scale solar and wind tenders have been issued in this period (up 3.5x over 2017 on an annualised basis). But tenders have been rushed out prematurely in a desire to meet targets. As much as 17 GW of tenders have been cancelled due to poor response for a variety of reasons – badly conceptualised schemes (10,000 MW of manufacturing linked tender), land and transmission capacity constraints and unviable ceiling tariffs. Another 6.5 GW of projects have been cancelled after completion of auctions and receipt of valid bids because the DISCOMs were not prepared to pay the auction tariffs.
Net of all undersubscriptions and cancellations, total utility scale RE capacity successfully awarded since January 2018 is 20.8 GW, a lowly 29% return on total tenders issued in the period.
Figure: Status of utility scale solar and wind power tenders issued since January 2018, GW
Source: BRIDGE TO INDIA research
Note: ‘Bids submitted’ shows total project capacity for which bids have been received for the non-cancelled tenders issued since January 2018.
Amongst all the challenges faced by the RE sector in the last year, the growing incidence of undersubscriptions and cancellations is the most unnecessary. It is self-inflicted and impossible to justify. We believe that the ensuing sense of chaos sends a dangerous message to investors – callous tendering authorities, environment of suspicion and risk of PPA renegotiation or even default. India is heavily dependent on fickle international capital for realising its RE ambitions and the government needs to be extra careful here. MNRE should step in immediately and take urgent action to fix the crisis.
