Why the 2.4 GW Solar Auction Was Cancelled

A few weeks ago, news that the Solar Energy Corporation of India (SECI) cancelled 2.4 GW of auctioned solar capacity made the headlines. The capacity cancelled was part of the 3 GW Interstate Transmission System (ISTS)-connected solar PV auction conducted by SECI in July 2018.

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. Per Mercom’s India Solar Project Tracker, ACME emerged as the lowest (L1) bidder after quoting a tariff of ₹2.44 (~$0.0355)/kWh to develop 600 MW capacity.

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.

After the auction, Mercom had reported that SECI’s 3 GW ISTS-connected solar auction could be cancelled as the implementing agency had issues with the difference in tariffs quoted by the developers.

Later, SECI awarded the contract for 600 MW to ACME, while performance bank guarantees of other bidders were returned.

There were many versions of stories why the contracts had not been awarded. Recently, a letter written by Minister for Power, R.K. Singh to Finance Minister, Arun Jaitley, detailed the reasons why other bidders’ bids were not accepted. Here are the key points from the letter:

Key Points

  • The difference between tariffs quoted by L1, L2, L3 and L4 bidders was too high.
  • Previously there used to be not more than a 10 paisa difference in tariff ranges (high to low). In this auction, the difference was 27 paisa.
  • DISCOMs do not want intermittent solar power at rates above ₹2.50/kWh as this would result in higher power costs for them, as they still must pay the fixed price of power to coal-fired plants that fulfill peak demand for these DISCOMs.
  • If L2, L3, L4 rates for that auction were accepted, the government would have to pay ₹230 billion (~$3.12 billion) extra over a 25-year period.
  • This would have been cited in the future as giving undue benefit to a few firms.

It is unclear how developers can be made to bid a certain tariff in a reverse auction. The only way could be through feed-in tariffs.