Tariffs in India Stabilize at Record Low of ₹2.44/kWh in SECI’s 3 GW Solar Auction

The Solar Energy Corporation of India (SECI) has auctioned 3 GW of Interstate Transmission System (ISTS)-connected solar photovoltaic (PV) in which ACME emerged as the lowest (L1) bidder by quoting a tariff of ₹2.44 (~$0.0355)/kWh to develop 600 MW.

SECI had tendered the capacity in February 2018. The tender was oversubscribed by 2.1 GW.

Solar tariffs in India have now stabilized at ₹2.44 (~$0.0355)/kWh mark with ACME emerging as the L1 bidder for the third consecutive time. Initially, ACME had quoted ₹2.44 (~$0.0355)/kWh in the 500 MW Bhadla Phase-III Solar Park Auction which was held in May 2017 and matched the tariff again in July, 2018 during SECI’s 2 GW ISTS-connected solar auction. This time, ACME bagged 600 MW at the L1 tariff.

The lowest solar bid in a reverse auction in India has remained at ₹2.44/kWh since May of 2017.

Tariffs in India Stabilize at Record Low of ₹2.44/kWh in SECI’s 3 GW Solar Auction

A SECI official confirmed the culmination of the 3 GW auction and said, “We were expecting tariffs to go below ₹2.44/kWh mark, but then no one can predict what will happen. Within a week, there have been so many fluctuations in tariffs.”

“Even though ₹2.44/kWh is still an aggressive bid, considering how quickly the tariff fell in the past few auctions, it is good that developers did not get too aggressive and breach the lowest tariff levels. The lowest tariff in this auction is based on a lot of assumptions that will play out a year and half from now and does not in any way reflect today’s project economics. Market conditions can change quickly in the solar sector. Last year, nobody could foresee the drastic change in China’s solar policy or the rupee depreciation at these levels. Hopefully all these potential market risk factors including possible safeguard duty have been built into the bids,” said Raj Prabhu, CEO of Mercom Capital Group.

According to Mercom’s source at one of the firms which was a bidding participant, “This is the rate that is stable for solar as the market is correcting itself. If anyone goes below the current low rate, then they will be taking a huge risk. These tariffs are good, for SECI and the developers, but I am worried how firms are going to find the transmission connectivity and land availability to set up 1,100 MW in one go. Now, such a thing can derail the entire juggernaut”.

The tariffs quoted in this auction ranged between a high of ₹2.90 (~$0.0423)/kWh and a low of ₹2.44 (~$0.0355)/kWh a ₹0.46/kWh difference between the lowest and highest bid.

Azure Power bid for 300 MW quoting a tariff of ₹2.64 (~$0.0385)/kWh and emerged as the L2 bidder.

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. The 1,100 MW project won by SoftBank is the single largest capacity bid in India to date in a reverse auction.

Tariffs in India Stabilize at Record Low of ₹2.44/kWh in SECI’s 3 GW Solar Auction

A total of 12 bidders had submitted technical bids totaling 5,100 MW against the tendered capacity of 3 GW.

One of the top bidders spoke to Mercom and commented that out of the 12 bidders, 11 qualified and only a few had to drop out of the bidding to stop further fall in tariff and that is what happened. After a few bidders opted out, the other bidders, who happened to be serious and pure play solar developers, held to their bids and didn’t need to get aggressive to win. Technically, there is no difference between the 2 GW ISTS-connectivity bid that concluded recently and we think the tariff is the same which is fair enough.

Mercom earlier published that tariffs were expected to tumble to record lows in this SECI 3 GW ISTS-connected solar auction, but after the results are out, the prediction stands corrected.

 

This article has been updated with quotes from  a SECI official and Raj Prabhu

Saumy Prateek Saumy is a senior staff reporter with MercomIndia.com covering business and energy news since 2016. Prior to Mercom, Saumy was a copy editor at Thomson Reuters. Saumy earned his Bachelors Degree in Journalism & Mass Communication from the Manipal Institute of Communication at Manipal University. More articles from Saumy Prateek.