On 20th November 2015, Karnataka Renewable Energy Development Agency issued a request for selection (RFS) for allocating 1,200 MW of solar PV projects. Karnataka has already allocated 690 MW of solar projects previously in phases (130 MW in 2012, 60 MW in 2013 and 500 MW in 2014). According to BRIDGE TO INDIA research total capacity commissioned in Karnataka is 126 MW under state policy. With 564 MW in pipeline and another 1800 MW under allocation process (including 600 MW by NTPC), we expect Karnataka to become the second leading state in terms of capacity (MW) allocated by states, next only to Telangana (refer).

Salient features of the tender:

• Projects will be allocated through a reverse bidding process and allocation would be done Taluk-wise.
• The size of each project is specified as between 3-20 MW and there is no upper limit specified for bids by individual developers.
• Up to 100 MW capacity has been reserved for module manufacturers in Karnataka.
• Benchmark tariff, the highest that a developer can bid, is INR 6.51/kWh (10 US cents).
• Time allowed for commissioning is 18 months.
• Developers are required to identify and acquire land on their own.

A list of 60 Taluks has been identified (out of a total of 177 Taluks in Karnataka) and each such Taluk can have a maximum capacity of only 20 MW. The Taluk based bidding process is unique with the rationale seemingly being that the state wants to disperse solar capacity across different regions rather than creating large concentrated capacity. This is desirable from the point of view of reducing stress on transmission infrastructure but will create many complications in bidding and lead to inconsistent competition as some Taluks may be more lucrative than others (differences in radiation, transmission infrastructure and land prices). It is also not clear what will happen if some Taluks get multiple bids at a very competitive price, say INR 5/kWh and another Taluk gets the lowest bid at INR 5.50/kWh.  Will the state be willing to pay a price premium?

Reserving capacity of up to 100 MW capacity for local module manufacturers  is also highly unusual. No other state or central policy has ever imposed such a condition previously. Major module manufacturers in Karnataka are Emmvee and HHV.

Last allocation of 500 MW in Karnataka in 2014 was oversubscribed by 3 times with successful bids falling in the price range of INR 6.71-7.12/kWh. Ongoing projects under state and central schemes are receiving aggressive bids in the range of INR 4.63-5.98/kWh. However, with restrictions on capacity developed under each Taluk it would be difficult for developers to scale up projects and we might actually see higher tariff bids for this tender.