Bids for the proposed and much delayed 750 MW solar power tender in the Rewa district of Madhya Pradesh are expected to be submitted early next week (refer our previous blog) although another extension still seems likely. The project is being tendered by Rewa Ultra Mega Solar (RUMS), a joint venture between Solar Energy Corporation of India (SECI) and the Government of Madhya Pradesh. Developers can bid for three project units of 250 MW each in a solar park being developed by RUMS. The tender offers large scale and enhanced bankability because of its unique structuring aspects:
- Power output will be sold to Madhya Pradesh utilities and Delhi Metro Rail on an open access basis plus the projects would benefit from state government payment guarantee and deemed generation compensation for grid unavailability significantly improving their risk profile particularly in comparison to other state government tendered projects;
- BRIDGE TO INDIA expects tariffs to fall substantially below the INR 4.00 (US ¢ 5.9)/ kWh mark, the lowest ever for any utility scale project in India;
- More states may incorporate some of the innovative measures from this tender to lower cost of their solar power procurement;
There are three unique features of this tender, which has been designed by the Government of Madhya Pradesh with assistance from International Finance Corporation (IFC) – inter-state open access sale of about 25% of power output to Delhi Metro Rail, a state government offtake payment guarantee and deemed generation compensation for grid unavailability. All these features are being adopted for the first time in a public solar procurement tender in India and may provide a template for future.
We believe that the overall risk profile for Rewa tender is amongst the best in India and similar to projects tendered by National Thermal Power Corporation (NTPC), which received the lowest-ever tariff bid in India of INR 4.34 (US¢ 6.4)/ kWh for a 70 MW project in Rajasthan in January 2016. Since then, module prices have declined by about 28%. Bidding interest in the tender seems strong with likely participants including SoftBank, Adani, ReNew Power, Enel, Engie, AES, FRV, Essel Infra, Azure Power and Hero Future Energies amongst others. Looking at all these factors, BRIDGE TO INDIA expects tariffs to fall substantially below the INR 4.00 (US ¢ 5.9)/ kWh mark, especially as there is a INR 0.05/kWh annual escalation in tariffs for 15 years and the tender provides 18 months for execution in a phased manner.
The Rewa tender has many unique features and addresses two of the most critical risks for solar project developers in India – offtake and grid availability. If the tender results are as competitive as expected, it would provide a template for other states for solar power procurement.