Government Junks Reverse Auction for Wind Projects to Expedite Capacity Addition

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In an expected but significant move for the wind sector, the Ministry of New and Renewable Energy (MNRE) said that it has decided to scrap the e-reverse bidding mechanism to ensure faster capacity addition.

After initial success, reverse bidding process has been almost unanimously acknowledged as the primary reason for dwindling wind capacity as falling tariffs across bids proved to be unsustainable for developers.

After peaking at about 4 GW of capacity addition in 2017, wind projects have progressively declined over the last five years.

Further, the ministry wrote to the government-owned renewable energy companies saying that it has also decided to issue 8 GW of wind capacity tenders annually starting this year and will continue until 2030.

The industry has been petitioning the government to provide a predictable horizon of upcoming bids so that it can prepare better and lower risks associated with project development.

The ministry elaborated on the bidding mechanism saying that bidders will have the option to bid for capacities in one or more states. The energy produced from the capacity established in each state will be combined and made available at a pooled tariff to all procurers. The power will be sold to distribution companies through power sale agreements at tariffs in accordance with the Electricity (Amendment) Rules, 2022.

The Solar Energy Corporation of India (SECI) will set the limits for the minimum and maximum bid size based on the wind renewable purchase obligation targets of each state, but the maximum capacity to be established in a year in any one state will be capped at 2 GW.

SECI is expected to plan an advanced bidding trajectory starting from 2023 until 2030. Based on the market conditions, it will review and update the trajectory every 2-3 years, and then revise its forward bidding trajectory for the next three years.

The National Institute of Wind Energy will develop, update, and publish wind resource maps on a periodic basis.

SECI, in collaboration with Power Grid Corporation of India and state transmission companies, will provide dynamic information on sub-station capacities and augmentation plans for the future.

The penalties for non-execution of the awarded project will include encashment of the performance bank guarantee which will be 5% or as per the upper limit stipulated by Ministry of Finance from time to time, whichever is lower.

If the project is not executed by the bidder even after 18 months of the schedule commercial operational date, the bidder will be debarred for 5 years.

Further, SECI will give a rebate of ₹0.02 (~$0.00025)/kWh on the applicable trading margin (presently the applicable trading margin is ₹0.07 (~$0.00086)/kWh of energy sold) to those states who submit their off-take requirement within a specific window of time ahead of each auction round.

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