March 2022

India’s utility-scale solar segment continues to show promising growth with sustained investor confidence and interest from large developers. A competitive bidding mechanism and timely government interventions have greatly helped in attracting private investments.

Thus, the solar power segment continues to witness large and successful auctions despite successive waves of the Covid-19 pandemic. The most recent auctions, conducted in early 2022, have also garnered a good response from the developer community. For instance, Gujarat Urja Vikas Nigam Limited’s (GUVNL) auction for 500 MW of solar projects (Phase XIII) saw successful bids from four parties at the same tariff of Rs 2.29 per unit. The winners in this auction were Fortum (through Alpha Energy) with 200 MW, SJVN with 100 MW, Hinduja Renewable Energy with 120 MW and UPC Renewables with 80 MW capacity.

In February 2022, the Solar Energy Corporation of India auctioned 1,200 MW of ISTS-connected solar projects (Tranche X) in two parts of 600 MW each for the Koppal and Gadag substations. Ayana Renewable Power and Fortum emerged as winners, winning 300 MW each in both the tenders. The auction for solar projects connected to the Koppal substation witnessed bids of Rs 2.36 per unit and Rs 2.37 per unit from Ayana and Fortum respectively. Similarly, Ayana and Fortum quoted Rs 2.35 per unit and Rs 2.36 per unit respectively for the second tender.

While the recent bids have been largely successful, there has been a significant increase in solar power tariffs in recent months, especially as compared to the record low bids of Rs 1.99 per unit discovered in GUVNL’s auction for 500 MW (Phase XI) of solar capacity in December 2020. However, it must be noted that solar power costs have been impacted by the global disruption in supply chains, high prices of many essential commodities as well as the implication of basic customs duty on the import of solar cells and modules from April 2022 onwards.

It now remains to be seen whether these factors will together lead to a further uptick in solar power tariffs or will they stay comfortably below the Rs 2.50 per unit mark.