The solar sector in India is rapidly expanding with increasing participation from a mix of domestic and foreign developers. However, a detailed analysis of the winners of major solar auctions held across the country over the past 12 months indicates that bidding has been dominated by larger, more-established companies.

This trend was on display during an auction held in February 2017 for 750 MW of grid-connected solar projects at the Rewa Solar Park in Madhya Pradesh. In the auction, ACME Solar (part of ACME Group which has filed for IPO) emerged as the lowest (L1) bidder by offering to develop a 250 MW project (Unit-2) at a tariff of ₹2.970 (~$0.044)/kWh for the first year and a levelized 25-year tariff of ₹3.30 (~$0.0494)/kWh.

According to Mercom India Solar Project Tracker, since the completion of the Rewa Solar Park auction, over 4 GW of large-scale projects have been auctioned. Of the auctioned capacity, larger developers have accounted for approximately 80 percent of the capacity awarded.

The 1,500 MW TANGEDCO auction has not been taken into account for this analysis as TANGEDCO used the option of asking other bidders to match the L1 tariff to develop projects instead of e-bidding where developers have the option of outbidding each other. NLC was awarded the leftover capacity of 709 MW after matching tariff of ₹3.47 ($0.0537)/kWh.

“Larger developers who are backed by strong balance sheets and corporate entities, PE financed or publicly traded have separated themselves from the smaller developers at least since the REWA auction last year. Stronger financial resources and access to lower cost capital allows these larger developers to weather the current uncertainties around trade cases and risk better than smaller developers,” said Raj Prabhu, CEO of Mercom Capital Group.

In the Rewa Solar Park auction, the lowest quoted bid by these larger developers was a rupee less than the previous low tariff of ₹4.34 (~$0.065)/kWh recorded in the state of Rajasthan in January 2016.

By comparison, the quoted tariffs ranged from a high of ₹4.68 (~0.0723)/kWh to a low of ₹3.15 (~$0.0487)/kWh in the 250 MW Kadapa Solar Park auction held by the National Thermal Power Corporation (NTPC) in April 2017. In that auction, French developer Solairedirect (majority owned by French utility Engie) quoted the L1 tariff of ₹3.15 (~$0.0487)/kWh to develop the entire capacity.

Likewise, in the 250 MW Bhadla Phase-IV Solar Park auction held in May 2017, South Africa based developer Phelan Energy Group and Mumbai-based Avaada Power Private Limited, (formed by the founders of Welspun Renewable Energy which was sold to Tata Power in 2016), won bids to develop 50 MW and 100 MW of solar projects, respectively, by quoting ₹2.62 (~$0.0405))/kWh each. SBG Cleantech (a joint venture between Softbank, Bharti Enterprises and Foxconn) was awarded a 100 MW capacity at a tariff of ₹2.63 (~$0.0407)/kWh.

In the 500 MW Bhadla Phase-III Solar Park auction held in May 2017, Indian developer ACME Solar again emerged as the winning bidder, winning the right to develop 200 MW of solar by quoting a tariff of ₹2.44 (~$0.037)/kWh.

In September 2017, an L1 tariff of ₹2.65 (~$0.0413)/kWh was quoted in the 500 MW grid-connected solar PV auction conducted by Gujarat Urja Vikas Nigam Limited (GUVNL). In that auction, Gujarat government agencies pulled down the bids, but even then, the winner was Azure Power, a publicly traded company on the New York Stock Exchange, which actually bid slightly higher than the L1 tariff. Azure Power won the bid to develop 260 MW of grid-connected solar PV projects by quoting a tariff of ₹2.67 (~$0.0417)/kWh for 300 MW.

In that GUVNL auction, the L1 tariff was actually quoted by GRT Jewellers India Private Limited. The company quoted the lowest tariff of ₹2.65 (~$0.0413)/kWh to develop 90 MW of solar, but the capacity it is now developing is not even one-fifth of the auctioned capacity. The auction stands out as an anomaly as two government agencies were both pushing the bids lower.

In the 500 MW Bhadla Solar Park auction conducted in December 2017, Hero Future Energies (A Hero Group Company) won the right to develop 300 MW at a winning bid of ₹2.47 (~$0.0380)/kWh, followed by SoftBank Group which won 200 MW at the second-lowest bid of ₹2.48 (~$0.0382)/kWh.

In another 250 MW Bhadla Solar Park auction conducted in December 2017, Azure Power won the right to develop 200 MW by quoting the lowest tariff of ₹2.48 (~$0.0388)/kWh and ReNew Power won the remaining 50 MWs with a bid of ₹2.49/kWh.

Then, in February 2018, in the Karnataka Renewable Energy Development Limited (KREDL)’s taluk-wise solar auction the lower limit of the quoted tariff was ₹2.94 (~$0.045)/kWh and the highest quoted tariff stood at ₹3.54 (~$0.056)/kWh. In that auction, ACME Solar and Shapoorji Pallonji emerged as the biggest winners. ACME Solar won bids to develop 106 MW and Shapoorji Pallonji won bids to develop 185 MW solar projects.

In March 2018, an L1 tariff of ₹2.91 (~$0.044)/kWh was quoted in an auction to develop 550 MW of grid-connected solar PV projects conducted by KREDL. In the auction, ReNew Power quoted a tariff of ₹2.91 (~$0.044)/kWh to develop 300 MW, Avaada Power quoted a tariff of ₹2.92 (~$0.044)/kWh to develop 150 MW, and Azure Power quoted a tariff of ₹2.93 (~$0.045)/kWh to develop 100 MW of solar projects.

In the past, stakeholders in the Indian solar sector have told Mercom that due to regulatory uncertainties smaller players have refrained from making low bids on large projects. Instead, they are winning small projects spread out over a variety of auctions.

To discuss this apparent trend in detail, Mercom asked Parag Sharma of ReNew Power if this recent trend is evidence of a larger shift underway in the Indian solar sector where the bigger players win most of the mega bids. Sharma responded, “No, I do not think so. Take the recent GUVNL auction for instance, a small player emerged as the L1 bidder.”

Elaborating further, Sharma said, “A small player will have small equity due to which they can viably bid for small packages. Take the instance of Karnataka, in KREDL’s taluk-wise auctions, small players have won a lot of capacities.”

“If you talk about large-scale solar projects in solar parks, that’s a different story as over there the minimum bid capacities begin at 50 MW making it tough for the smaller players to participate,” added Sharma.

An Azure Power executive told Mercom, “Look at the uncertainties, project capacities, and the equity base of the companies participating in the reverse bidding; the story is clear. Firms with large equities have the wherewithal to account for uncertainties such as extra duties and increasing module prices for mega projects. The same is true for many other emerging and small players, and they have stayed away from large auctions.”

“In the auctions for small capacities, all the players (emerging as well as established) have been competing neck and neck,” added the Azure Power executive. “For a company such as Azure, it is easier to attract investment at lower rates and that proves to be a bonus in bidding for larger projects. We have gone public, and that has been helping us.”

A top executive at one of the prominent development company in India said: The game is about equity base. Larger companies find it easy to finance projects, that’s common knowledge. Now, take into consideration the events of the past few months, anti-dumping petition, additional port duty, safeguard duty towards the end; these made it much more tough for smaller players to participate in an already competitive market.

The major regulatory developments discouraging the smaller players with limited financial resources are, ironically, policies designed to support the Indian domestic solar manufacturing sector.