MSEDCL had floated 30 district wise tenders on August 31, 2019, to procure 1,350 MW of solar power in 30 circles with project sizes ranging from 25 MW to 50 MW. For one of the districts, Baramati, a bid was received for 5 MW, and Kiran Renewables was found to be technically qualified. The tariff ceiling for this tender was set at ₹3.14 (~$0.044)/kWh.

The tariff was discovered through competitive bidding conducted by the Maharashtra State Electricity Distribution Company Ltd. (MSEDCL) under the state’s Mukhyamantri Saur Krishi Vahini Yojana. The power procured from this project will be counted towards the fulfillment of MSEDCL’s solar RPO.

MSEDCL had requested the commission to approve the tariff of ₹3.14 (~$0.044)/kWh and the signing of the PPA with the successful bidder for 5 MW of solar power. It had also requested the commission to make this power eligible for meeting its solar RPO requirement.

The commission noted that MSEDCL had conducted a transparent, competitive bidding to procure 5 MW of solar power and the tariff of ₹3.14 (~$0.044)/kWh discovered during the bidding process was comparable with the rates of ₹3.09 (~$0.043) and ₹3.15 (~$0.044)/kWh that were adopted by the commission before.

With this background, the commission approved the tariff of ₹3.14(~$0.044)/kWh for the procurement of 5 MW of solar power.

The commission further noted that even after repeated extensions of the bid submission deadline, the response to the tender was very poor. Against the total bid capacity of 1,350 MW, only one bid was received for 5 MW and that too by only one bidder.

The commission also observed that recently, the discovered rate for utility-scale projects had increased slightly, and the commission in its recent order adopted the discovered rate of ₹2.83 (~$0.039) /kWh for 150 MW solar power procurement by Tata Power Company Limited.  Also, the Solar Energy Corporation of India (SECI) successfully auctioned 250 MW of grid-connected solar photovoltaic (PV) power projects in Dondaicha Solar Park (Phase – I), located in Dhule district of Maharashtra, with tariffs ranging between ₹2.87-2.91 (~$0.0407-0.0412)/kWh.

Considering the recent developments, the commission observed that MSEDCL might review its bidding conditions to encourage more participation in the bids under the Mukhyamantri Saur Krishi Vahini Yojana. The commission reiterated the fact that the distribution licensee should decide the ceiling rate, and no prior approval from the commission is required. However, if MSEDCL is planning any changes in the bidding proposal which deviates from the standard bidding guidelines, then it needs approval from the commission.

Earlier this year in August, the state commission had dismissed a petition filed by MSEDCL seeking the approval of tariff for 1,170 MW of solar projects to be set up under the Mukhyamantri Saur Krishi Vahini Yojana. The MSEDCL had requested for the adoption of tariff in the range of ₹3.16 (~$0.045)/kWh to ₹3.30 (~$0.046)/kWh.

The failure of auctions under the  Mukhyamantri Saur Krishi Vahini Yojana is primarily due to low tariff caps. In a true reverse auction, the developers will bid at a tariff that they think is viable. With most government agencies adopting tariff caps, the developers are forced to bid at prices set by government agencies who have no clue what the ground realities are. In other cases, government agencies have refused to approve the tariffs if they think it is high even though it was determined through a reverse auction. Unless the reverse auctions are conducted where the bidders determine the price based on market conditions auctions will continue to fail.