The government will continue to cancel solar and wind auctions if it finds that the prices discovered through reverse bidding are high.

“We will accept bids which are reasonable. If we come across bids which we consider to be excessive, we will cancel them,” said R.K. Singh, Minister of Power, according to a PTI report. He was speaking at a curtain raiser press conference of 2nd Global RE-INVEST.

But the only catch here is, no one knows which tariff is going to be considered unreasonable by the government.

Recently, both central and state agencies cancelled approximately 4 GW of solar auctions. For example, Solar Energy Corporation of India (SECI) cancelled 2.4 GW out of a 3 GW Interstate Transmission System (ISTS) connected solar auction held in July 2018.  In the auction, ACME had emerged as the lowest (L1) bidder by quoting a tariff of ₹2.44 (~$0.0355)/kWh to develop 600 MW. A bid as low as ₹2.64 (~$0.0385)/kWh quoted by Azure Power, the second lowest bidder to develop 300 MW was also cancelled. Rutherford Solar Farms (Canadian Solar) quoted a tariff of ₹2.70 (~$0.0394)/kWh to develop 200 MW. Adani Green and ReNew Power quoted a tariff of ₹2.71 (~$0.0395)/kWh to develop 300 MW and 500 MW respectively. SBE Renewables (SoftBank) also quoted a tariff of ₹2.71 (~$0.0395)/kWh to develop 1,800 MW but was awarded 1,100 MW. All of these bids have been cancelled.

Agencies have stated that high tariffs and wide gaps between winning bids are the reasons for cancelling these auctions.

However, two recent developments, imposition of 25 percent safeguard duty and depreciation of rupee, will only make the task of keeping the tariff low difficult in short to medium term.

On the continuation of arbitrary cancellation of auctions, one of the developers who did not want to be named told Mercom,” MNRE is bent upon killing this market which was in a good shape till now and people were enthusiastic. We are living through the toughest moment in the history of NSM till now. Foreign players have already started rethinking about investing in renewable space and recent unsubstantiated allegation by the minister himself has dented their confidence.”

The sector is also exploring other ways to convey its disappointments without antagonising the government. Though their patience seems to be running thin.

However, in response, the government officials cite the example of recently held  auction of Gujarat Urja Vikas Nigam Limited (GUVNL) for 500 MW of grid-connected solar projects where Aditya Birla Renewables and Giriraj Renewables (Avadaa) quoted the lowest (L1) tariff of ₹2.44 (~$0.0338)/kWh to develop 100 MW and 300 MW respectively.

They argue that these tariffs are a vindication of their policies as the safeguard duty and other factors did not spike the tariff, showing the robustness of the process and strength of the market to absorb minor disruptions.

The minister also commented on the introduction of a close bidding regime for the sector. He said, “We had commissioned a study. They have said the reverse bidding system would be totally transparent and good for the sector.”