The Gujarat Electricity Regulatory Commission (GERC) has allowed the Gujarat Urja Vikas Nigam Limited (GUVNL) to cancel the 700 MW solar auction in the state’s Dholera Solar Park 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. In 2018, it scrapped a 500 MW auction, and in 2019 a 700 MW solar auction was canceled. In both cases, the reason for the cancellation was high tariffs.

Now, the state distribution company has canceled another 700 MW solar auction again, citing high tariffs. This time it was canceled after more than five months of the conclusion of the auction and after handing over letters of award to the winning bidders.

These are bad precedents that have been plaguing the industry said an official working for one of the successful bidders. The official added, “after spending time and money in the auction process and given the letter of award, GUVNL has retracted. This is setting a bad example. Where is the developer at fault here? If not, why should they be punished? GUVNL has said that the recent auction has resulted in low tariffs. But would this low tariff be realized if developers knew this auction could be scrapped?”

Speaking to Mercom, other developers commented that it is shocking to see this order from a conventionally solar-friendly state like Gujarat and moreover a state regulator seconding an unlawful step by the DISCOM. The developers are now contemplating talking to the state government along with other judicial options including filing a petition with the Appellate Tribunal for Electricity.

Developers are taken aback by the move of the state DISCOM and regulator as some had even moved their containers, gone ahead with demarcating land at the solar park for the project, and started with preliminary work after receiving the letter of award.

Background 

GUVNL had filed a petition with the Commission seeking approval for initiating a separate retendering process for the 700 MW of the 1 GW of projects previously tendered in light of recent price trends. These projects were yet to be tied up and did not have a ceiling tariff.

It said it had floated a tender to purchase solar power from 1 GW of solar projects in 2019. The tender received bids for only 300 MW of projects – 250 from Tata Power and 50 MW from Gujarat Industries Power Company Limited. Tata Power had quoted a tariff of ₹2.75 (~$0.038)/kWh, and GUVNL subsequently issued a letter of award only to them as they were the lowest bidder.

The remaining 750 MW was reissued, but the tender only received bids for 50 MW from Tata Power again. GUVNL issued the LOA for this, as well. The distribution company (DISCOM) stated that 700 MW of capacity in the Dholera Solar Park remained unallocated. Following this, the DISCOM raised the ceiling tariff for these projects from ₹2.75 (~$0.0376)/kWh to ₹2.92 (~$0.039)/kWh, hoping to attract more bidders.

In the auction for the reissued tender, Vena Energy Renewables and Tata Power quoted a tariff of ₹2.78 (~$0.0380)/kWh for 100 MW of projects each, ReNew Solar quoted ₹2.79 (~$0.0381)/kWh for 200 MW, and SJVN quoted ₹2.80 (~$0.383)/kWh for 100 MW.TEQ quoted ₹2.81 (~$0.384)/kWh for 500 MW of projects but was awarded only 200 MW under the bucket filling method.

However, GUVNL reviewed the auction in light of the recently discovered record-low ₹1.99 (~$0.027)/kWh tariff in its auction for 500 MW of solar projects (Phase XI) in December 2020. GUVNL believed that the reason for the low tariff was the significant drop in capital cost and other expenses for solar projects.

GUVNL noted that a tariff between ₹2.78 (~$0.0380)/kWh and ₹2.81 (~$0.0384)/kWh could impose significant financial strain on the DISCOM and consumers. It proposed retendering for the 700 MW of projects since power purchase agreements were yet to be approved by the Commission.

Commission’s Stance

The Commission stated that the DISCOM had abided by the regulations, consulted the state government as it should have, and sought its consent before retendering the projects. It opined that this “clearly appears to be for the public good and common good … the ultimate beneficiary is the public at large if the lowest tariffs are found.”

In its order, the Commission allowed the projects to be retendered and said that GUVNL could approach it for tariff adoption after conducting the bidding process again.

Recently, the GERC adopted the tariff of ₹1.99 (~$0.0270)/kWh discovered in the competitive bidding conducted by the GUVNL for procurement of power from 500 MW of grid-connected solar power projects in Gujarat.