Pre-bid meeting brings a lot more clarity for the upcoming NSM allocations

Pre-bid meeting brings a lot more clarity for the upcoming NSM allocations

The pre-bid meeting for allocations under batch one of phase two of the NSM was held today and was chaired by officials from the MNRE (Ministry of New and Renewable Energy) and SECI (Solar Energy Corporation of India).

  • The first point that was discussed was about the location of projects, its impact on the open access charges and who would be responsible to bear this cost
  • Another key aspect which was raised was regarding the impact of possible anti-dumping duties on these projects
  • Aspects related to project capacity and Capacity Utilization Factor (CUF) were also discussed at length

The government officials seemed satisfied that despite a new mechanism of funding, they have been largely successful in keeping the process simple and as similar to the phase one process as possible. SECI took up the responsibility from NVVN of trading power between the developers and the state utilities/any other obligated entities. Senior NVVN officials have helped in this transition. SECI hopes to create a dynamic trading environment, in which a developer is shielded from the direct off-taker risk. A special fund has been allocated to SECI to ensure timely payments in case one or more off-takers are unable to meet their commitments.

Approximately 60 developers along with several equipment suppliers, EPC contractors and consultants were present for the meeting. The variation in the type of developers was evident from the questions raised. On one end of the spectrum, there were developers who were sure that they would be bidding for the maximum possible bidding capacity of 200 MW. Given the fact they can secure only 100 MW, they wanted to know if they need to submit Earnest Money Deposit (EMD) for just 100 MW. On the other end of the spectrum were developers who were just figuring out how to become eligible for the bidding process. Then there was everyone in between. It was easy to count on your fingers to see how, if the bid viability permits, a handful of serious developers could easily take up the entire capacity two times over.

The first point that was discussed related to the location of projects, its impact on the open access charges and who would be responsible to bear this cost. This is a point BRIDGE TO INDIA has been raising since the first draft of the guidelines was released back in April 2013 (refer). SECI and MNRE have clarified that the developer is only responsible up to the interconnection point and will not have to pay any open access charges. Even SECI will not be paying these charges as they have not been accounted for in the margin that they are charging. It is the final off-taker who will end up the paying charges.

Another aspect that was raised regarded the impact of possible anti-dumping duties on projects. BRIDGE TO INDIA has raised concerns about this risk at multiple occasions in the past (refer). A suggestion was made to pre-exempt these duties for the upcoming projects as it is essentially unpredictable and might make projects unviable. The bidding process for India’s coal-fired Ultra Mega Power Plant (UMPP) policy was cited as a precedent for such an exemption. The MNRE officials did not think that a similar step could be taken, but acknowledged the fact that the risk is serious. The ministry will try to provide as much clarity as possible on both the timelines and the dumping proceedings to facilitate an informed decision for the developers.

Several clarifications were made for land procurement and lease related aspects: lease of private land for a project was permitted and a clause is to be added to that effect. The legality of a ‘right to use of land’ (given in states such as Madhya Pradesh) instead of the regular lease agreement will be looked into. The only state government officials that participated in the discussion were from Gujarat. It was indicated that Gujarat might be looking to attract NSM projects by providing support on evacuation and land allotment in the state’s existing solar park.

Aspects related to project capacity and Capacity Utilization Factor (CUF) were also discussed at length. As suggested by BRIDGE TO INDIA earlier, it was amply clear that as the incentive is in the form of an upfront capital infusion, SECI was comfortable with allowing excess generation at the project facilities. Any excess power generated is expected to be bought by SECI at INR 3/kWh. However, as all the excess power generated will be used to meet the renewable purchase obligations (RPOs) of the off-takers, developers will not be allowed to claim Renewable Energy Certificates (RECs) for this power.

The bidding process envisages a wait-list for the allocation process. For the waitlisted capacity, developers pointed out that submitting guarantees for a period of seven months and thereafter agreeing to the bid quoted today will put them at a risk of changing equipment costs and they asked for an option to be created for them to withdraw their names from the waiting list after two months. The MNRE officials agreed to look into the request.

It was clear that, based on everyone’s learning from phase one, the developers now seem much more comfortable with the overall structure of the bidding process and are more interested in understanding the finer details of the documents. The MNRE and SECI officials are meeting with lenders tomorrow to address their concerns as well. A document clarifying the relevant doubts raised by developers along with the necessary changes in RfS, PPA and VGF securitization documents will be published in a few days.

BRIDGE TO INDIA believes that the bidding process is on track and all major concerns have been addressed. We expect the non-DCR part of the biddings to be oversubscribed many times over. As far as the DCR part is concerned, developers are still unsure about the Indian manufacturers’ ability to supply the equipment on time. In case the DCR part of the biddings is undersubscribed, the capacity could perhaps be shifted to the non-DCR part. If that happens, we expect the entire 750 MW capacity to be allocated through this process.

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