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 (~$0.046-0.054)/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 Program).
“There are several interesting
aspects of the Kadapa auction. The winning low bid falling by close to five
percent 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 percent
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 second-largest solar installed capacity in India and backed by sovereign
wealth funds, Greenko bid almost 30 percent 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 March 31, 2017, according to the Mercom's India Solar Project Tracker, bid 44
percent higher, and Mahindra Renewables, which has the seventh largest
development pipeline, bid almost 50 percent 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 timeframe
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
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
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.
reported that the NTPC retendered 250 MW of solar at the Kadapa Solar Park
under the National Solar Mission (NSM) Phase-II, Batch-2, Tranche-I.