The Tamil Nadu Generation and Distribution Company (TANGEDCO) has received weak response to its request for selection (RfS) to procure 500 MW of solar through a reverse auction. Bids of only 117 MW have come in so far, which is less than 25 percent of the original procurement goal.

The distribution company has established the tariff benchmark of Rs.5.10 (~$0.0763)/kWh without accelerated depreciation. An official at TANGEDCO confirmed that bids aggregating 117 MW have been received. The official also added, “we are scrutinizing all the bids received and by mid-December the contracts will be awarded to successful bidders.”

Another TANGEDCO official stated that they expected to receive more bids than they did. There’s unrest in the market as small developers are grappling with cash issues as a result of demonetization, he said.

The Tamil Nadu Electricity Regulatory Commission has a solar renewable purchase obligation (RPO) target of 2.5 percent for the financial year (FY) 2016-17 and 5 percent for FY 2017-18. To meet RPO target, close to 1,200 MW of solar power is needed for the current financial year, and approximately 2,400 MW of solar power is required for FY 2017-18.

“The state has witnessed curtailment from renewables in the past and this capacity has been tendered directly by TANGEDCO, leading to inhibitions amongst the developers in the state,” commented a source at Adani. Demonetization might have affected the small developers but large developers in the state are worried about curtailment.

Commenting on TANGEDCO’s initial RfS announcement in October, Mercom Capital Group CEO Raj Prabhu had said, “TANGEDCO is a high risk off-taker due to their history of late payments and curtailment. Companies that plan to bid for these projects will be doing so at their own risk.”

According to Mercom’s India Solar Project Tracker, the state has a total installed solar capacity of 1.6 GW.