A 2 GW solar power projects reverse auction by NHPC witnessed a close competition among the developers. Four out of five winning firms have quoted the same tariff.
The tender was oversubscribed 1.57 times with seven bidders who participated in the auction. Renew Solar and NTPC Limited which had quoted the levellised tariffs of INR 2.57 and INR 2.61 respectively failed to qualify the bid. Avada had bid for 600 MW but could win only 320 MW. The minimum capacity a developer could bid on was 50 MW and only in the multiples of 10.
Solar power developers can set their projects anywhere in India. Also as per the bid rules, the successful developers will have to maintain a minimum Capacity Utilization Factor (CUF) of 19%.
Analysis Of Solar Power Tariffs
The upper cap on the solar tariff was INR 2.78. Earlier NHPC had fixed the maximum tariff to INR 2.95. The difference of more than 20 Paisa between the maximum and minimum tariffs can be attributed to aggressive bidding. Furthermore, the individual project sizes may have also played a role. But an underlying factor contributing to lower solar tariffs is whether the project belongs to the central government or the state. Central government projects carry lesser risk and therefore the tariffs remain on the lower side.
Here is the snapshot of the solar power projects of capacities 1GW and above which have gone for auction since 2018. The solar power tariffs of state-sponsored projects are high in comparison to the central government’s project.
Solar tariffs discovered in SECI auctions have consistently remained on the lower side. For the capacities above 1GW, the tariffs have consistently remained below INR 2.60 per unit. Further due to the ongoing pandemic the cost of the solar projects is expected to spike up. Therefore in the current scenario, the tariffs at INR 2.55-2.56 per unit are extraordinary. But as usual, the Internal Rates of Return (IRR) will be in the range of 5-10%.
Below is the indicated breakup of solar tariffs: