Solar Energy Corporation of India (SECI) recently conducted reverse auctions for 125 MW of the aggregate 440 MW capacity (390 MW capacity under open and 50 MW capacity under Domestic content requirement category) tendered under government solar park projects in Uttar Pradesh as part of its viability gap funding (VGF) scheme. In this scheme, developers sell power at a fixed tariff of INR 4.43/kWh (USD 0.06) and bid for VGF support of up to INR 10 million per MW (USD 151,515) for open category projects and 13.1million per MW (USD 198,000) for DCR category projects.
- Bids were received from only 3 developers; Azure Power, Indiabulls and SolaireDirect
- Indiabulls won the 50 MW Allahabad project at a VGF of INR 7.49 million per MW
- SolaireDirect was allocated the 75 MW project at Vijaypur at a VGF of INR 7.42 million per MW
- Projects totaling 315 MW did not receive enough bids to carry out a reverse auction
The poor response is a sober pointer for the government and especially with new tenders coming at break neck speeds, the industry needs to get a little bit more selective. There are various reasons as to why this tender has been so poorly under-subscribed:
- Developers seem unhappy with the quality of solar park infrastructure (land and evacuation)
- Despite SECI being the official purchaser of power, off take is a significant source of concern in Uttar Pradesh as local DISCOMS have poor credit ratings (C+ rating by CARE)
- High upfront solar park charges of INR 3.9 million/MW (USD 60,000) combined with a low fixed tariff/ VGF cap is not seen as sufficiently attractive by the developers
We expect the next three upcoming auctions totaling 1,250 MW by NTPC (400 MW in Telangana, 600 MW in Karnataka and 250 MW in Andhra Pradesh) to be extremely competitive because of strong offtake. Beyond that, the developers will condition their bid responses for various SECI and state tenders based on their comfort with offtake risk and local operating environment.