Solar Tariffs in DCR Auctions Decline

The tariff for solar projects developed under India’s domestic content requirement (DCR) category has declined by 35 percent during the past year as aggressive bidding trend continues. Earlier this month, the 250 MW DCR auction conducted by National Thermal Power Corporation (NTPC) saw Azure Power quote a tariff of ₹3.14 (~$0.0491)/kWh to develop a 250 MW solar project under the DCR category.

Other bidders to quote below ₹4 (~$0.0625)/kWh in the same auction were ReNew Power and Waaree Energies, with ReNew Power quoting a tariff of ₹3.15 (~$0.0492)/kWh to develop 150 MW and Waaree Energies quoting ₹3.95 (~$0.0617)/kWh to develop 25 MW. Also participating were Mahoba Solar (UP), a subsidiary of Adani, which quoted a tariff of ₹4.44 (~$0.0694)/kWh to develop 250 MW, and Canadian Solar Energy Holding, which quoted ₹4.95 (~$0.0773)/kWh to develop 100 MW.

Azure Power’s winning tariff of ₹3.14 (~$0.0491)/kWh was ₹1.7 (~$0.0266)/kWh (35 percent) lower than the previous low DCR tariff of ₹4.84 (~$0.0756)/kWh quoted by Tata Power in NTPC’s Phase-II Batch-II auction. Power purchase agreements for that auction were signed in December 2016. This month’s NTPC auction represented the first successful DCR auction of 2017 and all participating bidders quoted tariffs below the ₹5 (~$0.0781)/kWh mark.

In the auction, tariffs quoted ranged from a high of ₹4.95 (~$0.0773)/kWh to a low of ₹3.14 (~$0.0491)/kWh. There was also a notable difference in bids quoted, with the highest bid coming in almost 58 percent above than the winning low bid. A significant difference of opinion as to what a viable tariff is.

Solar Auctions under DCR in India

“With a lack of activity, even DCR auctions are getting extremely competitive. Developers are desperate for growth and are willing to go as low as it takes to win projects,” said Raj Prabhu, chief executive officer of Mercom Capital Group. “It is also concerning that there is a 58% difference of opinion as what a viable tariff is,” he added.

Over the last year, non-DCR tariffs fell by approximately 44 percent. During the same period Chinese module prices fell by approximately 23 percent while the price of Indian modules declined by about 17 percent.

NTPC 250 MW DCR Auction Results

NTPC initially tendered its project in August 2017 and will allow the developer to build the project anywhere in India.

This is the first time that a global module supplier has participated in a DCR auction. When contacted, a Canadian Solar executive in the engineering procurement and construction (EPC) wing said, “We are also an EPC contractor and have been working in India for some time now. We can source modules from Indian partners and, moreover, we thought the price of ₹4.95/kWh palatable, hence we bid.”

“Being a global module supplier does not disqualify us from participating in such tenders, soon Canadian Solar may have manufacturing units in India” added the Canadian Solar executive.

When contacted about the auction results, an NTPC official said, “A good auction for us, the tariffs are at par with most open category auctions, and even lower than the ₹3.30/kWh (levelized tariff over 25 years) quoted in the Rewa Ultra Mega Solar Park auction.” The letter of award will be issued soon, and the project will be developed quickly.

When asked about the project completion timeframe, considering the looming closing date of December 14, 2017, for the DCR category, the NTPC official said, “As of now, I cannot comment on that, for that there’s a different team that takes care of the power purchase agreement (PPA) intricacies.”

Mahoba Solar, an Adani subsidiary, had participated in the auction. When contacted regarding the tariff quoted in the auction, an Adani executive said, “We are into solar manufacturing, project development, as well as rendering EPC services. We quoted ₹4.44/kWh as we do not want to compromise on project quality.”

The Adani executive added, “To develop a project that’s both durable and a reliable source of power, quality components are required and, according to us, they are not viable below the price we quoted, hence we quoted what we quoted.”

Our long history of superior solar power operations with NTPC Vidyut Vyapar Nigam right from the inception of National Solar Mission has contributed to our success of procuring the one of the largest solar power contract auctioned by NTPC. We are delighted to make a contribution towards the realization of our Hon’ble Prime Minister’s commitment towards clean and green energy, through solar power generation, said Mr. Inderpreet Wadhwa, Founder, Chairman and Chief Executive Officer, Azure Power.

According to Mercom’s India Solar Tender Tracker, NTPC has tendered 751 MW of solar projects under the DCR category in Q3 2017.

The U.S. and India have agreed that December 14, 2017, will be the final day for the DCR category based on the WTO ruling.

In August 2017, Mercom reported that the Ministry of New and Renewable Energy (MNRE) proposed developing 7.5 GW of solar by 2022 using domestically manufactured solar cells and modules during the second phase of its Central Public-Sector Unit (CPSU) program.

Image credit: NTPC

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.