Winning Bids at Rs 2.20/kWh in First Solar Auction After BCD Announcements

The very first solar auction after the Basic Customs Duty announcement on cells & modules has fetched a winning bid of Rs 2.20/kWh in Gujarat.

The very first solar auction conducted after the announcement made by the Ministry of New and Renewable Energy (MNRE) of the Basic Customs Duty on Solar Cells and Modules from April 1, 2022, has fetched a winning bid i.e. lowest tariff of Rs 2.2 per unit (or Rs 2.20/kWh). The auction conducted by the Gujarat Urja Vikas Nigam (GUVNL) for the award of 500 MW solar projects saw the entire capacity awarded to five bidders.

According to industry sources, NTPC Renewable Energy won 150 MW capacity, Actis-backed Sprng Ujjvala Energy won 120 MW, Coal India bagged 100 MW capacity, and Tata Power arm TP Saurya was allocated 60 MW. All four bidders were awarded project capacities after submitting or matching the L1 tariff of Rs 2.2/kWh.

Beyond the L1 tariff, SJVN Limited was awarded the remainder of the 70 MW capacity after it had submitted a proposal for developing 100 MW worth of solar projects with a tariff of Rs 2.21/kWh.

On March 10, 2021, MNRE had announced the new Basic Customs Duty (BCD) on the import of solar PV cells and modules. Imposing a 25 percent BCD on solar PV cells and 40 percent duty on solar modules without grandfathering of bid-out projects. The date of the new duty cycle was announced to be April 1, 2022.

Three days after the announcement, ratings agency ICRA had come out with the first of many predictions on the impact on actual power costs. Girishkumar Kadam, co-group head, at ICRA had said that BCD is expected to result in an increase in the capital cost for a solar power project by 23-24 percent, which in turn would result in an increase in tariff by about 45-50 paise per unit.

However, at Rs 2.20/kWh, the latest bid prices are only Rs 0.21/kWh higher than the lowest solar tariff recorded in the country at Rs 1.99/kWh, also in a GUVNL auction for the award of 500 MW worth of solar projects to be developed in Gujarat. Thus, undercutting predictions made by ICRA and similar agencies, the BCD announcement has seen tariffs rise by 10.5 percent (from the lowest) in the first of many auctions that are expected to be conducted this year.

The tender had received bids from 11 bidders and was heavily oversubscribed. The developers that didn’t win any capacity in the auction are believed to be ReNew Power, Aljomaih Energy (the Saudi backed firm was one of the winners in the Rs 1.99/kWh solar auction), Ayana Renewable Energy and Juniper Green Energy.

In February, GUVNL – after reaching the Rs 1.99/kWh record solar tariffs in its latest auction – had cancelled the results of two previous auctions held for the award of 700 MW Dholera solar park and the 100 MW Raghanesda solar park in the state, after it had received permission from state power regulator Gujarat Electricity Regulatory Commission (GERC) to hold the auctions again. The agency had seaside that the higher tariffs would put a financial strain on both the distribution company as well as consumers after discovering the Rs 1.99 tariff. 

In the auction conducted for the 700 MW projects in August 2020, GUVNL had awarded the capacity to five bidders. With Tata Power and Vena Energy submitting the winning bids (Lowest Bids – L1) for 100 MW capacity each of Rs 2.78/kWh. Followed by ReNew Power which secured 200 MW project capacity with its bid of Rs 2.79/kWh. SJVN Limited came in with the L3 bid of Rs 2.80/kWh and secured 100 MW capacity while TEQ Power secured the remaining 200 MW capacity with its bid of Rs 2.81/kWh.

In September 2020, SJVN  had bagged a 100 MW solar PV power project in the Raghanesda Solar Park in Gujarat. The firm had participated in an open bidding process for allotment and had bagged the quoted capacity of 100 MW at the rate of Rs 2.73/unit on a build own and operate (BOO) basis.

A move that had left investors and developers doubtful about their interest in the Indian renewable sector which remains plagued by contract reneges and non-payment of dues. However, there seem to be no such fears in the minds of the five bidders (Tata Power, SJVN had both lost capacities in the cancelled results) that have now won capacity at surprisingly low tariffs from the same agency.