31 October 2021 | BRIDGE TO INDIA
Last week, SECI concluded auction for procuring 2.5 GW round-the-clock (RTC) power. The tender mandates that at least 51% of power shall be supplied by a combination of solar and wind sources including storage while the balance may come from any one non-renewable source. Winners include Hindustan Thermal (250 MW, tariff bid of INR 3.01), Greenko (1,001 MW, INR 3.18), ReNew Power (600 MW, INR 3.19), Power Mech (550 MW, INR 3.30) and JSW (99 MW, INR 3.45).
The tender, originally issued in March 2020, went through a series of changes in response to industry demands and issuance of competitive bidding guidelines for RTC power. There were stiff conditions for the bidders:
- Minimum 85% CUF or annual availability as well as a requirement to despatch power during any four ‘peak’ hours in a day as designated by the Regional Load Despatch Centre (RLDC) – with a penalty of 400% of applicable tariff for not fulfilling either of these conditions;
- Constant share of RE:non-RE power and no change in source of coal (domestic/ imported), if applicable, throughout the 25-year PPA term; and
- Commencement of power supply within 2 years – RE power should come from new greenfield plants (solar and/ or wind) while conventional power may be supplied from existing plants.
Tariff bids were required to have four components – fixed components for RE and non-RE power respectively, and variable components for fuel and transportation cost of non-RE power. Curiously, the bidders were also allowed to quote different fixed components for different years. Projects would be allocated on the basis of weighted average levellised tariff, computed as per CERC guidelines subject to bidders matching L1 bid. We understand that SECI has asked all bidders to match the lowest bid and submit revised tariff matrices. This process is expected to take at least a month before project capacities can be finally awarded.
As the following chart chows, the tender was oversubscribed 4.6x with many thermal power producers in the fray.
Figure: Winners of SECI 2.5 GW RTC auction
Source: BRIDGE TO INDIA research
In the previous RTC tender (400 MW, awarded to ReNew in May 2020, fully contracted by Delhi, Daman & Diu, and Dadra & Nagar Haveli DISCOMs), the winning bid had a levellised tariff of INR 3.56. Since then, prices of modules and wind turbines have shot up by 10-30% and the government has proposed a considerable hike in taxes and duties. It is therefore hard to understand how bids of INR 3.01-3.45 can be viable.
The range of winning bids is fairly large and we expect all bidders to be unable to match the L1 bid. As bid security requirement is now dropped in all new tenders, there is unfortunately no way to hold bidders accountable. We therefore see a big question mark over prospects of any projects going ahead under this tender. Tendering process needs more rigour to retain legitimacy.