The Solar Energy Corporation of India (SECI) has been looking for ways to ensure that power sale agreements (PSAs) are signed on time so that the renewable project construction activity can progress.
SECI’s manufacturing-linked solar projects auctioned in January have posed a unique challenge due to its large capacity and high discovered tariff.
SECI has now decided to bundle the higher tariff of ₹2.92 (~$0.04)/kWh discovered in the manufacturing-linked solar projects with other lower tariffs discovered in subsequent auctions to ensure distribution companies (DISCOMs) find the rates attractive to sign PSAs.
SECI’s tariff bundling
SECI has adopted the practice to pool the tariffs discovered in competitive bidding every six months. This pooling helps to ensure the availability of solar at a uniform rate to all the DISCOMs. Tariffs are pooled every year between January to June and July to December.
Pooled tariff is the weigthed average of the tariff discovered in the competitive bidding process for a specific time period. Some auctions result in very low bids than the others and it is comparatively tough to sell power to DISCOMs at higher tariff rates. To ensure DISCOMs during the specific period are able to procure power at uniform rates, the concept of pooled tariff was introduced.
The manufacturing-linked solar auction in January 2020 saw a tariff of ₹2.92 (~$0.04)/kWh for 4 GW of projects. Later, under the greenshoe option, another 8 GW of solar projects were slated to be developed at the same tariff.
Adani Green Energy won the bid to create 8 GW of solar projects at ₹2.92 (~$0.04)/kWh and Azure Power also won 4 GW at the same tariff. With a high tariff and a large capacity of 12 GW, SECI has been finding it challenging to sell power to DISCOMs even with pooling this tariff with others discovered during the first half of 2020.
As a solution, SECI has now decided to bundle the 12 GW of the solar in batches of 3 GWs. This bundling would be liable to changes depending on the actual commissioning achieved by the projects. For projects that are commissioned after June 2023, interstate transmission system (ISTS) charges and losses would be applicable, and the cost of the project would differ.
The 3 GW of solar projects with the tariff of ₹2.92 (~$0.04)/kWh is to be bundled with 1.2 GW (Tranche VIII) and 2 GW (Tranche IX) of ISTS-connected solar projects, which were auctioned in February and June, respectively. The winning tariffs in the 1.2 GW auction ranged between ₹2.50 ($0.0348)/kWh and ₹2.51 ($0.035)/kWh. The tariffs for the 2 GW auction were in the ₹2.36 (~$0.0313)/kWh and ₹2.38 (~$0.0316)/kWh range.
The resulting average tariff or the pooled tariff would be ₹2.66 (~$0.036)/kWh at which SECI plans to sign PSAs for 6.2 GW of solar projects.
Raj Prabhu is a recognized thought leader in clean energy markets where his work has influenced policies worldwide. He has a deep understanding of regulatory policy and clean energy markets and his market and opinion pieces are regularly published on both MercomIndia.com and other leading publications globally. Raj is also a regular speaker and presenter on clean energy policy and finance topics at conferences worldwide. Raj attended the KLE College of Science in Bangalore, India for physics and chemistry, and holds a Bachelor of Science Degree in Hotel and Institutional Management from Johnson and Wales University, Rhode Island. More articles from Raj Prabhu.