Auction Action

Tender sizes increase while tariff bids decline for renewable capacity

The International Energy Agency (IEA) has anticipated that project developers globally will build fewer wind farms and solar energy projects this year compared with the record roll-out of renewables in 2019. For India, the agency has projected a 23 per cent decline in solar capacity installation in 2020 compared to 2019, with the largest drop expected in distributed PV installations. Capacity addition in the wind power segment is also projected to decline. India has reportedly added about 715 MW of utility-scale solar capacity in January-March 2020, down 67 per cent from 2,163 MW during the same period in 2019. In the wind power space, the country added 328 MW of utility-scale capacity in the quarter ended March 2020, a 65 per cent decline from the 944 MW added in January-March 2019.

For the rest of the year as well, project development will continue to be slow due to coronavirus disruptions. While project construction activities were allowed to commence from April 20, 2020, another two to three months are expected to be lost in remobilisation, resolution of shipment blockages and transmission infrastructure set-up. There may also be delays in government approvals, or reopening of power purchase agreements (PPAs) in the case of open access projects. However, the coronavirus pandemic has failed to dampen the spirit of the country’s renewable energy sector.

Going by the recently concluded auctions and upcoming tenders, the industry is expected to rebound in 2021, with capacity additions exceeding 2019 levels. NHPC has successfully auctioned 2 GW (AC) of solar projects at tariffs below the 2019 average. The Solar Energy Corporation of India (SECI) has concluded its 400 MW round-the-clock renewables tender to supply 24×7 electricity through a mix of renewables – solar, wind, solar storage and hydel. Another 1.2 GW of renewable hybrid capacity has been auctioned by SECI for projects including an energy storage systems. In the rooftop solar space, Indraprastha Power Generation Company Limited has announced the successful completion of its auction for 30 GW of projects under the capex and Renewable Energy Service Company models. The prices discovered under these are highly competitive and, in some cases, are at record lows. Meanwhile, for several tenders, the bid submission deadline has been extended by up to a month, but there have been no significant cancellations.

At a time of great economic uncertainty due to the Covid-19 lockdown, these developments have reaffirmed investors’ faith in the long-term prospects of the renewable power sector in India. Renewable Watch has tracked and analysed recent developments pertaining to auctions and tenders to obtain a better picture of the solar and wind capacity addition trajectory in the coming years.

Auction analysis

The most unique project type auctioned in 2020 has been the 400 MW round-the-clock power supply project tendered by SECI. Goldman Sachs-funded ReNew Power won the world’s first tender for round-the-clock supply of green power by quoting a tariff of Rs 2.90 per kWh. The tariff is 124 per cent lower than the peak tariff discovered in the February auction for renewable capacity with a storage option, which also gave the assurance of continuous supply but was an expensive proposition when compared to coal-fired power. ReNew Power’s winning tariff is 35 per cent lower than state-run NTPC’s average tariff for coal-based power. Further, the tariff is 25-72 per cent lower than the Rs 6 per unit or so paid by discoms to buy power from the open market or peaking sources, mostly gas-based plants, to meet their demand.

At this tariff, the auction spells trouble for coal-fired plants, seen as the primary source of dependable power. By removing the barrier of intermittency associated with green power and addressing the affordability issue of solar storage systems, renewables will gain preference among consumers. It provides discoms a financially viable alternative for meeting their renewable energy obligation. In addition, the solar tariff is levellised for 25 years, while the thermal power tariff is for three to five years and becomes costlier every time coal or freight prices rise. This tender presents renewables a continuous source of power and encourages India to plan gigawatt-size projects.

The auction results also highlight the intense competition in the sector and the sector’s resilience to the economic impact of the pandemic. The reverse auction saw tariffs drop 19 per cent from the lowest opening bid of Rs 3.59 per kWh. Greenko quoted Rs 2.91 per unit. Ayana and HES Infra were the two other bidders. The SECI auction stands out because the bids were submitted on March 22, a day after the “janata (people’s) curfew” was imposed in the country and the coronavirus outbreak had started impacting investor sentiment.

Another auction that highlights the sector’s attractiveness is NHPC’s tender for 2 GW of solar capacity. The e-reverse auction received bids for 3,140 MW of capacity from seven bidders. The lowest quoted tariffs of Rs 2.55 per kWh and Rs 2.56 per kWh were registered against the initial tariff rate of Rs 2.78 per kWh. SoftBank, Axis Energy Ventures India Private Limited, O2 Power, EDEN Renewables and Avaada Energy emerged as winners with SoftBank, Axis Energy, O2 Power and EDEN quoting the lowest (L1) tariff of Rs 2.55 per kWh in the auction. They were awarded 600 MW, 400 MW, 380 MW and 300 MW of capacity respectively. Avaada Energy, which had placed bids for 600 MW, was awarded 320 MW at a tariff of Rs 2.56 per kWh. The awarded capacity can be installed anywhere across India.

Delays in ongoing tenders

While these tenders have given a major impetus to the industry, there is no denying that Covid-19 has significantly hampered the functioning of the sector at several levels. As a result, a number of ongoing tenders are being extended across the country. Some examples are as follows:

  • The Bihar Renewable Energy Development Agency (BREDA) has reissued a request for proposal (RfP) for the procurement of 250 MW of power from solar projects through a tariff-based competitive bidding process. BREDA has now removed the tariff ceiling of Rs 3.15 per kWh and extended the bid submission deadline from April 27, 2020 to June 16, 2020. The tender was initially launched in June 2019 and was reissued in December 2019 due to certain institutional and regulatory changes.
  • NTPC VidyutVyapar Nigam Limited (NVVNL), a wholly owned subsidiary of NTPC Limited, has extended the bid submission deadline of its tender for a 50 MW (AC) of grid-connected solar PV project at Panchet in Jharkhand. The deadline has been extended to June 4, 2020. Earlier, the deadline for the submission of bids was March 30, 2020. NVVNL also extended the last date for the receipt of queries of clarification from prospective bidders from March 21-May 21, 2020.
  • SECI has extended the bid submission deadline for its floating solar project tender with battery energy storage systems (BESS) to be developed at Kalpong Dam, Diglipur, in North Andaman. The deadline has been extended to June 15, 2020, from May 18, 2020. It also noted that the techno-commercial bid opening would be carried out on June 18, 2020. This is not the first time SECI has extended the bid submission deadline for the project. It had earlier extended the deadline for the project from May 4, 2020 to May 18, 2020. Before that, it had revised the deadline from February 13, 2020, to May 4, 2020. In January, the company had issued an RfS for setting up 4 MW of grid-connected floating solar projects with 2 MW BESS at the Kalpong Dam.
  • SECI has once again extended the bid submission deadline for a tender comprising 14 MW of solar power projects with 42 MWh of battery storage system (7 MW/21 MWh each) at Leh and Kargil. The project has been floated under the Prime Minister’s Development Package. The deadline has now been extended to June 30, 2020, from June 1, 2020. Earlier, in April, SECI had extended the bid submission deadline for the project from April 16, 2020 to June 1, 2020.
  • SECI has also extended the deadline to submit bids for 2 GW of solar and 2 GW of wind projects. The new deadline for the solar project is May 28, 2020. The earlier date for the submission of bids was May 5, 2020. The bid submission deadline for the wind project has been extended from May 6, 2020, to May 26, 2020. The ISTS-connected solar and wind power projects have been tendered under Tranche IX of the ISTS programme. SECI had issued the RfS for both the projects in March 2020.
  • Gujarat UrjaVikas Nigam Limited (GUVNL) has extended the bid submission deadline for its tender for 700 MW of solar projects in the state’s Dholera Solar Park (Phase IX). The new deadline for the submission of bids is May 30, 2020. Earlier, the deadline was April 30, 2020. GUVNL has also extended the technical bid opening date from May 1, 2020, to June 1, 2020, while the financial bid opening date has now been scheduled for June 8, 2020, instead of May 8, 2020. Of the total 1,000 MW capacity (20×50) of the Dholera Solar Park, the auction process for 300 MW (6×50 MW) has already been completed. In March 2020, the remaining 700 MW of capacity was retendered. The ceiling tariff for the tender has been set at Rs 2.92 per kWh.

New tenders and developments

The delays in ongoing tenders are not hampering state nodal agencies and other organisations to plan and auction new capacity. New tenders are being released across utility-scale solar and wind as well as the distributed solar segment.

  • North Eastern Electric Power Corporation Limited, a government enterprise, has issued a tender for undertaking an industrial all risk (IAR) insurance policy for 5 MW of solar PV power projects at Monarchak in Tripura. The IAR insurance policy will be effective for a year starting June 26, 2020. The deadline for receiving the bids is June 3, 2020, while the opening of techno-commercial bids has been scheduled for June 4, 2020.
  • The New Town Kolkata Development Authority has floated a tender for the installation of a 1 MW (2×500 kW) canal-top solar project at the Bagjola Canal located in New Town. The contract will also include comprehensive operations and maintenance for five years. The last date for the submission of online bids is June 8, 2020, and the pre-bid meeting will take place on May 20, 2020.
  • The Power and Electricity Department (P&ED) of Mizoram has floated a tender for 10 MW of grid-connected solar PV power projects at various locations in the state. As per the documents, the capacity of each solar project will be a minimum of 5 MW. An interested bidder can apply for a minimum of 5 MW per location, while the maximum capacity of the project will be 10 MW. The capacity of the solar PV project will be in multiples of 5 MW. The project will be developed on a build-own-operate basis. The last date for the submission of bids is May 28, 2020.
  • The Uttarakhand Renewable Energy Development Agency has issued a tender to empanel contractors for 575 kW of grid-connected rooftop and small solar power projects in the range of 1-500 kW. The last date for the submission of proposals is June 5, 2020.
  • Hubballi-Dharwad Smart City Limited has invited bids for the development of nearly 340 kW of grid-connected rooftop solar PV projects for selected buildings in different locations owned by the Hubballi-Dharwad Municipal Corporation. The last date for the submission of bids is June 17, 2020, and the pre-bid meeting will take place on June 2, 2020.
  • The Alipurduar Division of the Northeast Frontier Railways has issued a tender for the installation of grid-connected rooftop solar projects at eight railway stations in the region. The cumulative capacity of the projects is 151 kW. The last date for the submission of bids is May 27, 2020.
  • Indian Oil Corporation Limited (IOCL) floated two tenders for 580 kW of grid-connected rooftop captive solar power projects at its terminals in Tamil Nadu and Maharashtra. One is for a 180 kW project at the IOCL terminal at Sankari, Tamil Nadu, and the other is for a 400 kW project at the IOCL grease plant in Vashi district, Mumbai, Maharashtra. The deadlines for the submission of bids were May 18 and May 25, 2020 for Maharashtra and Tamil Nadu respectively.
  • The P&ED, Government of Mizoram, issued an empanelment tender for 500 kW of grid-connected rooftop solar PV power projects.The last date for the submission of online bids was May 21, 2020.
  • Jhansi Smart City Limited invited bids for hybrid rooftop solar power projects with zero export devices to be set up on government buildings and offices in Jhansi under the capex model. The last date for the submission of bids was April 14, 2020, but a successful bidder is yet to be announced.
  • Punjab State Power Corporation Limited announced subsidies for grid-connected rooftop solar systems ranging between 1 kW and 10 kW in the residential sector.

The way forward

According to the consultancy firm Bridge to India, around 37 GW of solar and wind projects are in the pipeline for auction. Except 3 GW capacity in the manufacturing-linked tender, the remaining 34 GW is due for completion in the next two years. However, it expects only 24 GW to be added in this period in view of the various operational and financing challenges. There are multiple reasons for the slowdown, which include a slump in power demand, challenges in land and transmission connectivity, debt financing and depreciation of the rupee. There is an urgent need for a revised roadmap to overcome these challenges.

The most critical is the deteriorating financial health of discoms. Owing to the decline in demand, discoms are reluctant to sign long-term PPAs and commit to long-term purchases. The government may also have to struggle to find buyers for the recently completed auctions. The Rs 900 billion package for discoms may help bail out these utilities from their financial crisis, but is unlikely to resolve the fundamental challenges facing the power sector.

One thing is clear. The way forward for the power industry is a growing share of renewables in the energy mix, and more so, storage-based renewable projects, which may be a game changer. SECI’s two latest tenders – the 400 MW round-the-clock project and the 1.2 GW renewable plus storage projects – will be a good learning experience for the industry, even if they might be difficult to scale up in the current form. The projects are an experiment-in-the-making where the burden of providing firm power has been shifted from coal-based power producers to renewable energy developers. This is certainly an innovative packaging, but it is too early to comment on its success because PPAs with discoms are yet to be concluded. That said, the projects will certainly enable India’s energy transition.

By Dolly Khattar

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