RTC auction a small step towards firm renewable power

RTC auction a small step towards firm renewable power

SECI completed auction for its 400 MW round-the-clock (RTC) tender last week. Entire capacity has been awarded to ReNew Power at a tariff of INR 2.90/ kWh. Other bidders included Greenko (400 MW, INR 2.91/ kWh) and HES Infra (100, 3.91). Ayana had also submitted a bid for 50 MW but was not qualified for e-auction stage. First year tariff would be escalated by 3% annually for 15 years going up to INR 4.52/ kWh and stay flat thereafter. Levellised tariff is estimated at INR 3.56/ kWh. Unlike most other tenders, offtakers for this tender were identified in advance. New Delhi Municipal Council and Dadra & Nagar Haveli, a Union Territory, are expected to procure 200 MW power each.

The project configuration would most likely be solar-wind hybrid with a relatively small battery storage component;
Minimum CUF and scheduling conditions are stacked in favour of the project developer;
Evolution of tender designs, well under way now, would radically alter competitive dynamics and financing profile of renewable sector;

Contrary to the name, there is no provision for intra-day scheduling of power in the tender. The developer needs to comply only with monthly and annual CUF requirements of 70% and 80% respectively – much higher than the usual 19% and 22% stipulation for vanilla solar and wind tenders. However, the offtakers are obligated to purchase power output equivalent to CUF of up to 100%.

The tender is technology neutral – the developer is free to choose solar, wind or any other renewable technology alongside any storage technology. High CUF requirement means that actual project capacity would be much higher at about 2.4-2.8x tender size. An optimum project design would most likely use a mix of solar and wind technologies with minimal battery storage capacity. And as permitted in the tender, the projects would most likely be located in different regions to achieve highest possible techno-commercial efficiency.

We believe that the tender conditions (CUF, scheduling) are stacked in favour of the project developer. As a key requirement of the two offtakers – firm, predictable power meeting their demand profile – is not met, it remains to be seen if they would actually be willing to go ahead and sign the PPAs. Interestingly, New Delhi Municipal Council’s total power requirement is only 1,400 million kWh, equivalent to 80% CUF for a 200 MW project. So how they could switch their entire procurement to this project and commit to 100% CUF is not clear.

Nonetheless, alongside the recent peak power tender, the RTC tender signals a step change in the market and a move away from vanilla tenders. In response to DISCOM demand, MNRE is pushing for tenders seeking predictable power output. SECI has already issued a 5,000 MW RTC tender seeking a blended mix of renewable and thermal power (bids due on 4 June 2020). We believe that this evolution is going to radically alter the nature of market. For one, the number of participating developers is likely to come down because of complex technology and risk considerations. Second, as storage component becomes larger, tariffs would gradually inch up and renewables would compete more evenly with thermal power.