The Gujarat Urja Vikas Nigam Limited (GUVNL) has scrapped the recently conducted auction for the development of  500 MW of grid-connected solar photovoltaic (PV) projects in the state.

According to a document reviewed by Mercom, GUVNL has also returned the performance bank guarantees (PBGs) submitted by the bidders.

In February 2018, GUVNL had tendered 500 MW of grid-connected solar PV projects to be developed across Gujarat to meet its renewable purchase obligation (RPO).

In March 2018, Kalthia Engineering and Construction emerged as the lowest (L1) bidder by quoting a tariff of ₹2.98 (~$0.046)/kWh to develop 50 MW of solar PV projects.

After the auction, Mercom had reported, “The L1 tariff quoted in this GUVNL auction is ₹0.33 (~$0.005)/kWh higher than the L1 tariff of ₹2.65 (~$0.0413)/kWh quoted by GRT Jewellers India Private Limited in the previous 500 MW auction held by GUVNL.”

However, even by the first week of April 2018, the individual project capacities had not been awarded as higher tariffs were under review by the GUVNL board of directors.

A GUVNL official had then told Mercom, “Tariffs quoted in this auction are way more than that quoted in the GUVNL 500 MW solar auction held last year. That is why the GUVNL board has been involved and they will take the final call.”

When contacted again, the official said, “We cannot be signing PPAs at these rates, these tariffs are too high. Plus, even the developer interest had dimmed and when the board sat down and discussed we thought it is better to scrap this auction and wait for some clarity on the impending safeguard duty order.”

The GUVNL official further stated, “The developers have been factoring in safeguard duty in their bids, else why is there a more than 30 paisa difference in the prices quoted in our previous auction and this.”

We will write to the central government to provide clarity on the safeguard duty and the pass-through option. In case safeguard duty is levied it must be levied prospectively not retrospectively, added the GUVNL official.

When asked if this capacity will be retendered soon, and if GUVNL will make it more attractive to bidders by introducing Viability Gap Funding option (VGF), the GUVNL official said, “We will retender it, but only after receiving proper response from the central government. GUVNL has no plans to introduce VGF; who will pay for it? The government won’t pay as of now and if GUVNL has to pay for VGF from its own coffers, why not settle down for these high rates then.”

“This is just an example of what will happen if safeguard duty is imposed. If a sub ₹3/kWh tariff is too expensive for a state like Gujarat, many other states will complain it is expensive for them too. This also sets a bad precedent for other states to cancel if they don’t like the auction price. Essentially Gujarat is saying don’t price the safeguard duty risk in your bids,” said Raj Prabhu, CEO of Mercom Capital Group.