Decoding The healthy Response to NHPC 2000 MW Solar Tender

NHPC in MoU with GRIDCO for 2 GW Pumped Storage, 1 GW Solar in Odisha

On the face of it, the response to the NHPC (formerly National Hydroelectric Power Corporation) 2 GW tender is more than a little surprising. Not only has the tender sailed through, it has done so with flying colours, by any stretch of imagination.

Five well established players in the form of SoftBank-backed SB Energy, Axis Energy Ventures India, O2 Power, EDEN Renewables, and Avaada Energy have emerged winners.

Whats more, SB Energy, Axis Energy EDEN and O2 Power all quoted an identical L1 tariff of Rs 2.55/kWh in the auction, with each being awarded the full quoted capacities they had submitted proposals for under the tender. SB Energy won rights to develop 600 MW solar projects, Axis Energy won 400 MW capacity, EDEN Renewables won 300 MW and O2 Power won 380 MW capacity.

Avaada Energy which quoted a tariff of Rs 2.56/kWh was awarded 320 MW capacity. 

Not only are these tariffs attractively low, they are also well below the ceiling for the auction, of Rs 2.65. To get these rates at a time when uncertainty is at its peak, is a testament to the fear of missing out (fomo), when it comes to the renewable sector in India. The efforts of the Ministry of New and Renewable Energy (MNRE), which has worked hard to make a case for, and build a more supportive eco-system for renewable energy players, especially solar players, also needs to be noted. NHPC’s own relatively clean image and professionalism has also helped, no doubt.

The tender, by putting in conditions like a minimum bid size of 50 MW, or an EMD of Rs 4 lacs per MW also thinned out prospective bidders, ensuring that this would be shootout between large, well funded players. as it has turned out too.

One of the reasons being cited for the tenders success is the continued inputs that the cost of equipment imports, contrary to expectations, will continue to be low or even drop a little, thanks to the slump in demand globally caused by the coronavirus. So Chinese manufacturers who have managed to get up and running will continue to offer a good deal.  Moreover, as India continues to push for a solar+hybrid or solar+storage mode, as outlined by the MNRE secretary recently, this tender, and a few more this year, might offer the last of the tenders offering the opportunity to deliver vanilla solar energy through an ISTS linked project, as the secretary himself put it. Future tenders are likely to be more complex, requiring higher investments and planning for storage or a mix of solar +wind, or even solar + thermal in cases.

For NHPC itself, the response is a welcome entry to the big league for renewable energy, outside Hydro power. The firm, like many other PSU’s, including NTPC and NLC, had seen its solar energy targets reset massively upwards as the government has pulled out all stops to get close to its 175 GW commitment by 2022. In 2019-20, the firm generated 26121 million units of power through its various projects.

For almost every bidder that has won, they have existing projects under construction, or delivered, at the price points they have won. So one assumes they have an even better understanding of the efficiencies they can wring out now.

For developers who missed out, and those  sitting on the fence due to the prevailing business uncertainty, the tender’s success will be a strong incentive to relook their own plans and strategies.