Bid submission date for SECI’s 5,000 MW renewable-thermal-storage hybrid tender has been extended to 3 November 2020. This is the eighth bid submission extension for the tender as developers have raised various concerns on tender design, contract structure and penalty regime. Bidding date for SECI’s 2,500 MW Karnataka tender and Railways 2×1,000 MW tenders has also been extended multiple times. While there are problems related to land acquisition by Karnataka government in the SECI tender, the issue with Railways tenders is unsuitable clauses related to project siting and land use.

• Slowdown in tender programme, confusion regarding new tender designs and repeated deadline extensions are creating a sense of unease in the sector;
• The developers, already reeling from greater execution challenges, delayed construction and higher working capital costs are suffering loss of confidence;
• MNRE needs to streamline the programme and offer greater transparency to investors;

Main issues in the renewable-thermal-storage hybrid tender pertain to change in law provisions, coal linkage, connectivity regions and share of power from different sources.

A look at the monthly data for tender issuance and project award shows activity declining steadily over the last few months.

Figure: Tender issuance and auction capacity

Source: BRIDGE TO INDIA research
Note: Auctions data refers to actual capacity awarded.

Uncertainty is not confined to new tenders alone. Even the status of many auctions completed in the last nine months is unclear. By various estimates, there are as much as 16-19 GW of projects where SECI has successfully completion auctions but is unable to get DISCOMs to contract power purchase. The list includes capacity awarded under 12,000 MW manufacturing-linked tender (tariff INR 2.92/ kWh), 1,200 MW peak power tender (average tariff INR 4.11), 400 MW round-the-clock power tender (INR 3.55) and 2,500 MW blended wind tender (2.99). Reasons for unsigned PPAs include a mix of low power demand and relatively high tariffs in some of the more complex tenders.

The scale of unsigned PPAs is staggering. Together with slowdown in tender programme, confusion regarding new tender designs and multiple deadline extensions, it has led to apprehension in the developer community about state of affairs. Some of these problems clearly owe their origins to COVID. But the somewhat disorderly nature of tendering process has not helped. It causes unnecessary anxiety and imposes additional cost burden on developers, who are already reeling from greater execution challenges, delayed construction and higher working capital costs.

MNRE is trying hard to tie-up PPAs and has even proposed a bundled scheme combining a mix of high tariff and low tariff projects to bring down average tariff for DISCOMs in the acceptable range. There is also belated acceptance that issuing tenders and completing auctions without firm back-to-back demand from DISCOMs is not desirable. If SECI changes its tendering approach whereby DISCOM demand is tied up in advance of tender issuance, it will be a lesson well learnt.

India has the largest tendering programme worldwide in the renewable sector. The need of the hour is to back it up with greater transparency, improved scheme design and better coordination between different government agencies.