Bridge India

SECI is re-opening 50 MW tender in Maharashtra for bidding – has the tariff revision dampened investor’s interest?

Bids were submitted last month for a 500 MW tender under the Viability Gap Funding (VGF) scheme to Solar Energy Corporation of India (SECI). In this tender, 50 MW was reserved for Domestic Content Requirement (DCR) category and remaining 450 MW was for open category. However, the bidder interest in this tender was highly subdued as compared to other recent tenders (refer). The most surprising outcome was that only one participant bid for the 50 MW under DCR category. This tender for DCR category will now be re-opened for bidding.

  • Only one company, Adani, submitted bid for participation in 50 MW DCR category
  • Downward revision of tariff to INR 4.43/kWh is the likely reason for such lower interest
  • We expect low interest for DCR projects in the upcoming tenders in Gujarat, Uttar Pradesh and Andhra Pradesh

The primary reason for such subdued interest in the tender is the downward revision in tariff for VGF based projects to a fixed INR 4.43/kWh from the earlier INR 5.43/kWh for the first year with an escalation of INR 0.05/kWh for next 20 years (equivalent to a levelized tariff of INR 5.79/kWh). The upper cap of VGF remained unchanged at INR 13.1 million/MW for the DCR category. As per our calculations, taking the VGF benefit into account, effective revised levelized tariff works out to an upper cap of INR 5.46/kWh.

For the 50 MW DCR category allocation, only one company – Adani, participated in the bid. As a result, the allocation has been cancelled and the bids will be invited once again. Even for 450 MW allocation for open category, the median winning bid was higher in terms of levelized tariff by about INR 0.27/kWh as compared to the auction results for NTPC projects in Andhra Pradesh (refer).

BRIDGE TO INDIA believes that there are two primary reasons for such poor interest in the DCR category. First, the international bidders are usually not interested in such tenders as seen in the past. Second, the higher cost for DCR modules means that tariff expectation for such bids are significantly higher. For example, in the 500 MW tender by NTPC in Andhra Pradesh in December 2015, the difference in winning tariff in open category and DCR category was about INR 0.50/kWh, equivalent to additional VGF of about INR 6.5 million/MW. Hence, a combination of fixed tariff of INR 4.43/kWh and VGF of INR 13.1 million/MW is not very attractive for projects under DCR category.

Re-opening of the DCR tender does not augur well for similar DCR projects in the upcoming tenders in Gujarat (total 250 MW, DCR quota of 25 MW), Uttar Pradesh (total 440 MW, DCR quota of 50 MW) and Andhra Pradesh (total 500 MW, DCR quota of 100 MW).

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