The Ministry of New and Renewable Energy (MNRE) has come up with a timeline for floating utility-scale solar tenders and conducting auctions. According to the schedule, the Solar Energy Corporation of India (SECI) can only float solar tenders and conduct auctions in four months – December, March, June and September. NTPC and other public sector undertakings (PSUs) like NHPC Limited and Central Electronics Limited will have January, April, July and October to work on their tender and auction commitments. Meanwhile, state agencies will utilise the months of February, May, August and November for similar activities.
In November 2017, the MNRE provided a roadmap for achieving the solar power target of 100 GW by 2022. According to the roadmap, tenders amounting to 20 GW were to be bid in 2017-18 and 30 GW each was planned for the next two years. However, the planned capacity was not tendered evenly across the year. In 2018, the month of July was packed with tender and auction activity. According to Renewable Watch Research, in this month, three utility-scale, one canal-top, two floating solar tenders and two small-hydro tenders were floated. All the tenders were issued by state agencies and were unevenly distributed across the states.
Rationale for the timetable
The release of the roadmap by the ministry crystallised the government’s commitment to achieve the 100 GW solar tender, but did not help in ensuring stability in the tender and auction activities. In addition, there have been instances where the bids of two implementing agencies have clashed. This creates distortions in the market, adversely affecting developers, manufacturers and distribution companies (discoms). If there is a concentration of tenders in any month, developers resolve to over-bidding. This happens because of the developers’ desperation to win the project at any cost and secure their future cash flows. This behaviour invariably leads to oversubscription and the successive cancellation of the tender. These administrative and behavioural flaws have compelled the government to come up with the timetable. Now, developers will have more time to assess the risks associated with the site at which the project has to be developed and calculate a realistic internal rate of return that is in line with the conservative outlook of financers. A broader risk assessment will inadvertently nudge developers to bid a reasonable tariff and achieve financial closure easily.
Module manufacturers too can gain from the solar timetable. Currently, manufacturing plants are not working at full capacity. The inefficient management of the plants is reflected in the high price of modules, which is ultimately borne by the developers. The timetable will help manufacturers better manage their production and inventory.
In recent tenders, it has been seen that the bidding process takes place first and the evacuation infrastructure is developed subsequently. Due to the lack of evacuation infrastructure, some discoms are not able to honour the power purchase agreements (PPAs) and later resort to back-downs. This not only puts financial pressure on the developers but also reduces the credibility of the discoms. Now, the implementing agencies will have two months to work in sync with discoms and developers to prepare a blueprint for the next round of tendering, which resolves the issues to a certain extent.
As power is on the concurrent list, successful coordination with the states for the implementation of the timetable is doubtful. According to industry experts, there is a possibility that the months allocated for the state implementing agencies will see inaction.
Despite these issues, the timetable seems to be an important administrative reform for the sector. If it succeeds, the government can roll out similar timetables for wind and hybrid projects.