Solar and Wind Power Procurement Situation is a Mess

Amid lukewarm interest shown by solar project developers, the Solar Energy Corporation of India (SECI) has now decided to raise the upper tariff ceiling for two of its mega tenders which had failed to garner adequate response in the past.

When contacted to comment on the amendment, a SECI official said that the ceiling tariffs were raised considering the recent changes in the market over the past few months.

SECI has raised the upper tariff ceiling for the tender to set up 10 GW of interstate transmission system (ISTS) connected solar photovoltaic power projects linked with 3 GW (per annum) of solar manufacturing capacity. The previous upper tariff ceiling was ₹2.75 (~$0.03802)/kWh. SECI has raised the upper ceiling by 10 paise (~$0.00138)/kWh to ₹2.85 (~$0.03940)/kWh.

SECI had initially tendered 5 GW of manufacturing capacity linked with ISTS-connected solar PV projects which was later reduced to 3 GW.

SECI has also raised the upper tariff ceiling for the tender to develop 1,200 MW of ISTS-connected wind and solar hybrid projects. The previous upper tariff ceiling was ₹2.60 (~$0.03594)/kWh. It has also been raised by 10 paise (~$0.00138)/kWh to ₹2.70 (~$0.03732)/kWh. For this tender, SECI has also extended the bid-submission deadline from November 14, 2018, to November 20, 2018.

SECI had initially tendered 2,500 MW of ISTS-connected wind-solar hybrid power projects (tranche-I). Later, the capacity of ISTS-connected wind-solar hybrid power project was reduced to 1,200 MW and the ceiling tariff was reduced from ₹2.93/kWh (~$0.040/kWh) to ₹2.60/kWh (~$0.035/kWh).

Despite the amendments to these two tenders,  the new ceilings are still lower than the tariff ceilings initially proposed by SECI. For both the tenders, the upper tariff ceiling is still lower than the initial upper ceiling of ₹2.93 (~$0.04050)/kWh that was fixed by SECI when the tenders were launched.

Raising concern over the proposal by the government to impose caps on solar tariffs, the Solar Projects Developers Association (SPDA) had recently written to the government cautioning against the move.

In a letter addressed to the Union Power Minister R.K. Singh, the SPDA raised its concern saying that the decision to cap tariffs needs to be reversed because it is likely to make solar projects unviable. Elaborating further, the letter explained that bids are determined keeping in consideration a range of issues like the changes in module prices, currency risks and varied solar radiation across states.

Solar project developers hope that the government allows the price mechanism to be determined by market dynamics rather than government intervention.

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.