On 1st April 2015, the Southern Power Distribution Company of Telangana Limited issued a request for selection (RfS) and a power purchase agreement (PPA) for allocating 2 GW of solar PV (refer). This follows the state’s successful allocation of 500 MW late last year and places Telangana right at the top of Indian states with respect to solar. No other state has allocated 2.5 GW till date. Even the central government allocations have not yet reached that mark. So far, India has only built 3.5 GW of solar.
- The allocation process is aggressive on both the benchmark tariffs and the allocation capacity
- After the announcement in Telangana, Tamil Nadu, Karnataka and several other states are expected to announce their new allocations
- Indian states are now likely to be on the driving seat for the next 12 months
Projects will be allocated through a simple reverse bidding process. The benchmark tariff, which is the highest tariff that a developer can bid at, is INR 6.45/kWh (10.4 US cents) for projects below 8 MW and INR 6.32/kWh (10.2 US cents) for projects above 8 MW. A capacity of 500 MW has been reserved for projects below 8 MW. There will be a separate bid evaluation for the two categories. Minimum project size is 2 MW. The upper limit is only determined by the evacuation capacity at the relevant substations. This can reach as much as 450 MW in one of the districts (details are provided in the RfS document).
The allocation process is aggressive (perhaps too aggressive?) on both the benchmark tariffs and the allocation capacity. Incidentally, the benchmark tariff for the smaller project category is the same as the lowest tariff received by the state in a previous allocation late last year in a bid submitted by First Solar. Such an aggressive approach may be justified in light of the great demand. The previous bidding process for 500 MW was heavily over-subscribed with bids for 1,850 MW. In addition, the state has seen additional interest outside of the previous bidding process.
As central government allocations under the National Solar Mission keep getting delayed (refer), states are now taking the lead. This is something that BRIDGE TO INDIA has been predicting in prior posts. Read this article to get our overall perspective on where the new utility scale opportunities will lie.
Even on the distributed solar front, as the central government takes its time to decide on the future role of subsidies and incentives for rooftop solar, state governments are taking a lead. Last month, Maharashtra released its draft net-metering guidelines and Uttar Pradesh finalized its net-metering policy. Except Gujarat, Jammu & Kashmir, Bihar, Jharkhand and six of the seven north-eastern states, all Indian states now have released draft or finalized net-metering guidelines.
The 2 GW of planned allocation in Telangana and new expected allocations in Tamil Nadu, Karnataka and several other states will likely keep the states in the solar driving seat for the next 12 months. The first feedback on developer interest in Telangana’s aggressive allocation process will come in on 10th April 2015 at the planned pre-bid meeting
