Pent-up de­mand for projects re­sulted in record low bid of Rs 3.15/kWh at Kadapa so­lar auc­tion

Power Watch India - - GREEN AHEAD -

The so­lar tar­iff in In­dia hit a new low with So­lairedi­rect’s win­ning bid of Rs.3.15 (~$0.0487)/ kWh, which was 4.5 per­cent lower than the Rs 3.30 (~$0.0494)/kWh (lev­elized over 25 years) quoted at the REWA auc­tion in Fe­bru­ary 2017. The 250 MW pro­ject was ten­dered by NTPC for the Kadapa So­lar Park un­der the open cat­e­gory in Andhra Pradesh.

Tar­iffs quoted ranged be­tween a high of Rs 4.68 (~0.0723)/kWh – by Mahin­dra Re­new­ables – and a low of Rs.3.15 (~$0.0487)/kWh. Cana­dian So­lar and Ostro En­ergy also quoted tar­iffs be­low the four-ru­pee mark, but were un­suc­cess­ful. This ten­der is an in­di­ca­tor for fu­ture auc­tions that Rs.3-3.50 (~$0.0460.054)/kWh is the new nor­mal. With this auc­tion, NTPC has suc­cess­fully awarded so­lar projects ag­gre­gat­ing 3,000 MW as man­dated un­der the Na­tional So­lar Mis­sion (NSM), Phase-II, Batch-2, Tranche-I (State Spe­cific Bundling Pro­gramme).

“There are sev­eral in­ter­est­ing as­pects of the Kadapa auc­tion. The win­ning low bid fall­ing by close to five per cent in 60 days is con­ceiv­able con­sid­er­ing the con­tin­u­ing de­cline in mod­ule prices and the dol­lar ex­change rate. But, it is in­ter­est­ing to see such a huge dis­par­ity be­tween pro­ject de­vel­op­ers as to what is an at­trac­tive win­ning bid for each of them,” said Raj Prabhu CEO of Mer­com Cap­i­tal Group.

So­lairedi­rect told Mer­com that the low bid was based on the fact that the trans­mis­sion sys­tems were al­most com­plete, they would be us­ing their own cells and mod­ules, and NTPC has a history of pay­ing de­vel­op­ers on time. “If you com­pare the REWA tar­iffs to the rate that we have quoted for the first 10 years, you will see that the price is not that low. These prices are sus­tain­able if the de­vel­oper is con­fi­dent, and NTPC has never de­layed pay­ments,” stated a source at So­lairedi­rect.

While Ostro En­ergy’s bid was al­most the same as So­lairedi­rect’s, Cana­dian So­lar’s bid was about eight per cent higher. Ac­cord­ing to Mer­com’s In­dia So­lar Pro­ject Tracker, So­lairedi­rect has 215 MW un­der devel­op­ment (ex­clud­ing the Kadapa Pro­ject) and 154 MW of in­stalled projects. Cana­dian So­lar and Ostro En­ergy have much smaller pipe­lines and in­stalled ca­pac­ity.

Ostro En­ergy was also con­fi­dent in NTPC. “We knew pay­ments would be on time,” com­mented a source at Ostro En­ergy about their bid. “Hav­ing the en­tire pro­ject lo­cated in one place, with good so­lar ir­ra­di­a­tion, and fall­ing mod­ule prices were rea­sons why we bid so low,” added the source.

With the sec­ond-largest so­lar in­stalled ca­pac­ity in In­dia and backed by sov­er­eign wealth funds, Greenko bid al­most 30 per cent higher com­pared to the win­ning bid. Likely more cog­nizant of at­trac­tive re­turns than bid­ding ag­gres­sively just to build a pipe­line, Azure, a public com­pany, bid al­most 40 per­cent higher. Adani, the third largest so­lar in­staller as of 31 March 2017, ac­cord­ing to the Mer­com’s In­dia So­lar Pro­ject Tracker, bid 44 per cent higher, and Mahin­dra Re­new­ables, which has the sev­enth largest devel­op­ment pipe­line, bid al­most 50 per cent higher.

The Kadapa auc­tion shows that ag­gres­sive bid­ding in this case is more than just pro­ject eco­nom­ics as most of these projects can pro­cure com­po­nents at ap­prox­i­mately the same price lev­els (or at least within a few points). It comes down to de­vel­op­ers will­ing to give up re­turns to de­velop a pipe­line. Tenders and auc­tions have slowed down over the past cou­ple of quar­ters in In­dia and bank guar­an­tees are stuck and over­heads are in­creas­ing. There is a huge pent up de­mand for large-scale projects as com­pa­nies have in­vested and staffed up to meet In­dia’s ag­gres­sive so­lar in­stal­la­tion tar­get but are not see­ing the auc­tions.

Look­ing at pro­ject de­tails, the pro­ject com­ple­tion time-frame is 13 months from the date of sign­ing the power pur­chase agree­ment, while REWA has 19 months. In fact, the Kadapa pro­ject needs to be com­pleted four months be­fore REWA. Both the REWA and Kadapa projects are the same size, so scale is not an is­sue. REWA had pay­ment guar­an­tees while Kadapa has NTPC, which is con­sid­ered a safe off-taker.

We were ex­pect­ing prices near Rs 3.50 (~$0.054)/ kWh. If states and im­ple­ment­ing agen­cies tweak their tenders ef­fec­tively, so­lar costs can be brought at par with ther­mal through­out the coun­try, added an NTPC of­fi­cial.

Mod­ule prices have fallen dras­ti­cally over the past year and the evac­u­a­tion in­fra­struc­ture is be­ing de­vel­oped, which led to such low bids, said an of­fi­cial at the Andhra Pradesh So­lar Power Cor­po­ra­tion.

Mer­com had pre­vi­ously re­ported that the NTPC re-ten­dered 250 MW of so­lar at the Kadapa So­lar Park un­der the Na­tional So­lar Mis­sion (NSM) PhaseII, Batch-2, Tranche-I.

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