The Tamil Nadu Generation and Distribution Corporation (TANGEDCO), which had tendered 500 MW of solar to meet its renewable purchase obligation (RPO), has received technical bids to develop 300 MW of solar. This is the second solar tender by TANGEDCO which is witnessing a tepid response. Previously TANGEDCO tendered 500 MW and received bids to develop just 117 MW.

The lowest bidder quoted Rs. 4.40 ($0.065)/unit, which is Rs. 0.01 ($0.001)/unit lower than the benchmark cost set by TANGEDCO, stated an engineer at TANGEDCO. The engineer also stated that with the exception of a 100 MW bid (the lowest bid received), most bids went for small project capacities.

Despite the changes made by TANGEDCO, this tender did not live up to expectations. The TANGEDCO had recently reduced the upper ceiling for tariffs to Rs. 4.50 ($0.067)/unit and increased the project completion timeframe.

In the past, we have seen the TANGEDCO backing down and asking the developers to provide new reduced tariffs. This is a factor why few developers might not have shown interest in this auction, stated an official at Tamil Nadu Electricity Regulatory Commission (TNERC). The state has a history of late payments and solar curtailment.

The Tamil Nadu Electricity Regulatory Commission has a solar renewable purchase obligation (RPO) target of 2.5 percent for the financial year (FY) 2016-17 and 5 percent for FY 2017-18. To meet its RPO target, close to 1,200 MW of solar power is needed in the current financial year, and approximately 2,400 MW of solar power is required for FY 2017-18.

The state has recently joined the UDAY program, which is expected to provide some credibility to TANGEDCO, but developers are skeptical about TANGEDCO tenders.

According to Mercom’s India Solar Project Tracker, Tamil Nadu has 1.6 GW of installed solar capacity.