Developers Write to Prime Minister’ Office on the Gujarat Solar Auction Fiasco

The Solar Power Developers Association (SPDA) has written to the Prime Minister’s Office (PMO), against the delays in signing the power purchase agreements (PPA) by the Gujarat Urja Vikas Nigam (GUVNL) for 700 MW of projects at the 1,000 MW Dholera Solar Park.

Last week, the Gujarat Electricity Regulatory Commission (GERC) had allowed  GUVNL to cancel the 700 MW solar auction and retender it (Phase IX) in an attempt to discover a lower tariff for the projects. This is not the first time that GUVNL has canceled the auctions citing high tariffs.

The park comes under the Dholera Special Investment Region (DSIR), which is expected to become a global manufacturing hub. The invitation for bids was issued on February 16, 2019, with a ceiling tariff of ₹2.75 (~$0.038)/kWh.

However, due to operational challenges at the site, the tender was undersubscribed. Eventually, Tata Power Renewable Energy was awarded 250 MW at ₹2.75 (~$0.038)/kWh.

A second tender was issued for the remaining 750 MW on June 24, 2019, which received a poor response of just 50 MW. Tata Power was again awarded the 50 MW capacity.

Both projects were approved by the Gujarat Electricity Regulatory Commission (GERC) and are under construction.

Both tenders were undersubscribed due to the difficult terrain at the Dholera Solar Park, which has failed to attract investors at a ceiling tariff of ₹2.75 (~$0.038)/kWh.

Some of the issues at the location that inflate the cost of project construction and maintenance include:

  • Frequent flooding of nearby rivers and the Gulf of Cambay gushing into the site’s low lying areas, which leaves it waterlogged for at least nine months a year.
  • The groundwater is around 1.5-2 meters heavily laced with chlorides and sulfates, which, coupled with the coastal environment, results in heavy corrosion and needs superior quality design and materials.
  • The site is not suitable for the latest bifacial modules due to soil conditions and frequent flooding, restricting the choice of technology.

Since the tenders were undersubscribed, GUVNL took up the matter with Solar Energy Corporation of India (SECI), Gujarat Power Corporation (GPCL), which is the implementing agency, and the Department of Industrial Policy and Promotion (DIPP).

SECI, which had plans to develop 5000 MW at DSIR, proposed a new tariff of ₹3.06 (~$0.042)/kWh, saying  the ceiling tariff was too low at ₹2.75 (~$0.038)/kWh.

However, GUVNL raised the ceiling to ₹2.92 (~$0.40)/kWh. Based on the new tariff, GUVNL floated the remaining 700 MW tender, which was oversubscribed by seven bidders to an aggregate of 1,300 MW. Eventually, after conducting a reverse auction, the project was awarded in the range of ₹2.78 (~$0.038)/kWh to ₹2.81 (~$0.039)/kWh. The LoA was subsequently issued on October 9, 2020.

The PPAs that were scheduled to be signed on January 9, 2021, are pending. The developers have alleged that GUVNL was unfairly comparing the Dholera project tariffs to lower tariffs discovered in subsequent auctions.

The developers claim that such comparisons were unfair, given the challenges on-site at DSIR, and when a transparent bidding process was followed, and tariffs were discovered in the range of ₹2.78 (~$0.038)/kWh and ₹2.81 (~$0.039)/kWh, which were lower than the ceiling of ₹2.92 (~$0.040)/kWh.

The five developers selected for the project are O2 Power, ReNew, Tata Power, SJVN, and Vena Energy.

The developers have requested the PMO to intervene in the matter as the land on the project site has already been demarcated, and a few have already paid for land-related charges. The developers have only received 15 months to execute the project.

They have said that the stance of GUVNL would have huge repercussions on the investment environment in Gujarat and India.