Two auctions were completed last week by SECI for a 1,800 MW wind tender and a 1,200 MW solar tender respectively. Both were heavily undersubscribed and received only two responses each: wind – CLP (250 MW) and Enel (300); solar – SB Energy (450) and GRT Jewellers (150). Final project allocations were made only for 441 MW (INR 2.83-2.84/ kWh) and 480 MW (INR 2.53-2.65/ kWh) respectively, less than one-third of the total tendered capacity. The two tenders had ceiling tariffs of INR 2.85/ kWh and INR 2.65/ kWh respectively.
- There has been a dramatic fall in bidding interest in the last six months;
- Even the leading bidders are likely to go slow in future as they focus on internal challenges and execution of already substantial project pipelines;
- The problems resulting in low bidding interest seem unlikely to go away anytime soon and could hurt the sector growth prospects severely;
Including the two latest auctions, there have been 11 wind and solar project auctions in the last four months in India.1 Only two of these auctions have been fully subscribed – SECI Maharashtra 250 MW in May 2019 and SECI pan India 1,200 MW solar in June 2019. The other nine tenders have been heavily undersubscribed. The chart below shows how bidding interest in the sector – measured as a multiple of total bid response to total tendered capacity – has fallen dramatically in the last six months.
Figure: Utility scale solar and wind tenders, MW
Source: BRIDGE TO INDIA research
Note: Data includes only those tenders that have not been cancelled subsequently and where bids have been submitted already. Tenders with total capacity of 8,933 MW are excluded as their bid submission data is not available. Manufacturing linked tenders are also excluded.
As per our database, the number of bidders in the renewable market has fallen from more than 200 in 2015 to only 31 in H1 2019. Share of top five bidders in total bid submissions has gone up sharply from 36% to 54% in just 18 months. We expect some of these five bidders – SB Energy, ReNew, NTPC, Adani and Azure – to also go slow in future because they have built substantial project pipelines and face their own internal operational and financial challenges.
There are many reasons for falling investor interest – increasing cost and risks associated with land acquisition plus transmission, tightening liquidity in the financial markets, and aggressive ceiling tariffs. There is also heightened risk awareness in the wake of mounting payment delays and PPA renegotiation attempts. None of these problems seems like going away anytime soon, so the bidding uncertainty may persist particularly if the government is keen on rushing out more capacity to auctions. Low investor interest could hurt the sector growth prospects severely and unfortunately, this risk has been ignored by the government, DISCOMs and developers alike.
[1] In addition, part capacity of two Gujarat tenders for Raghanesda and Dholera solar parks (200 MW and 750 MW respectively) was reissued but was again undersubscribed receiving responses of only 100 MW and 50 MW respectively.
