Project bidding in fanciful territory

29 August 2021 |

It has been raining auctions again. Seven auctions totalling 3,950 MW have been completed in just seven weeks. Strong bidding interest has led to further fall in tariffs. SECI discovered a record low tariff of INR 2.34-2.35/ kWh for wind-solar hybrid projects in its 1,200 MW auction this week with NTPC (450 MW), Ayana (450), NLC (150) and Azure (150) as the winners. Tariffs fell by 3% over last SECI solar-wind hybrid auction in December 2020. Madhya Pradesh’s 500 MW solar auction received bids of INR 2.14-2.15/ kWh, another new low tariff since announcement of basic customs duty (BCD) on solar cells and modules. Winning bidders in this auction included Tata Power (330 MW) and Saudi Arabia-based Aljomaih (170).

  • Tenders are getting heavily oversubscribed due to scarcity of auctions and high investor interest;
  • Tariffs have fallen in comparison to last year despite levy of BCD on solar cells and modules, higher equipment prices and implementation of ALMM;
  • Only a miraculous fall in equipment costs would make these bids viable;

Bid interest in utility scale tenders is at near all-time high levels. Tenders are getting routinely oversubscribed by 5-6x as developers are anxious to win projects. As the following chart shows, there was a big slowdown in auctions in the 12-month period leading up to July 2021. Scarcity of auctions, huge backlog of unsigned PPAs from last year and strong investor interest have distorted demand-supply balance.

Figure: Winning tariffs in select solar and wind-solar hybrid tenders

Source: BRIDGE TO INDIA research
Note: Prices are given for imported modules on a CIF basis, before any domestic taxes and duties.

There were as many as 22 unique bidders in the seven auctions. Aggressive bids by NTPC and other PSUs (total capacity won: 1,125 MW, 28% share) have added to the bidding pressure. Even state tenders with higher offtake risk are sailing through again. In fact, state auctions have dominated this year (88% share) with Madhya Pradesh, Andhra Pradesh, Maharashtra and Gujarat taking the lead. Remarkably, SECI has completed only two auctions this year.

Solar tariffs have hovered broadly in the INR 2.30-2.40 range, lower than levels seen for most of last year. This is despite levy of 25-40% BCD on solar cells and modules, equipment prices shooting up by more than 10%, implementation of ALMM and higher offtake risk. All recently tendered projects face uncertainty in procurement of modules with likely ban on use of imported modules.

It is hard to justify winning bid levels. As we noted recently, investment enthusiasm is running ahead of fundamentals and clouding objective risk assessment. Equipment prices would need to come down by 35-40% for these projects to be viable.

Recent reports

A business case for renewable energy certificates for Indian companies to meet RE 100 targets

C&I consumers account for 53% of power consumption but only 6% of this requirement is met from direct procurement of renewable power. In face of m...


A business case for rationalisation of Green Tariffs in India

Only about 6% of total C&I demand is met from direct procurement of renewable power. In face of multiple challenges faced by established routes li...


India Corporate Renewable Brief | Q3 2022   

Our latest edition of quarterly report provides a detailed regular update on key trends and developments in the C&I renewable market....

Buy Report Download Executive Summary

India PV Module Intelligence Brief | Q3 2022   

This report captures quarterly trends in module demand and supply, import and domestic production volumes, supplier market shares, break-up by technol...

Buy Report

India Solar Compass | Q3 2022   

This report provides a detailed update of all key sector developments and trends in the quarter – capacity addition, leading players, tenders and po...

Buy Report Download Executive Summary
Award winnig research
We use cookies to offer you an optimal user experience and collect information on website usage.