As Solar Bids Firm Up, Indian State Cancels 500 Megawatt Auction
We recently reported that bids in a recent 500 megawatt solar power auction held in Gujarat jumped sharply. Now the utility that organized that auction has decided to cancel the project allocations and re-tender the capacity.
Gujarat Urja Vikas Nigam Limited, or GUVNL, has announced that it scrapped the latest 500 megawatt auction for solar power projects and shall re-tender the capacity soon. The reason cited for the decision is higher-than-expected bids.
GUVNL had floated a tender to allocate 500 megawatts of solar power capacity in February of this year. The results were announced last month, with the lowest winning wind at Rs 2.98 (4.6¢/kWh) while the highest winning bid was Rs 3.06/kWh (5.0¢/kWh).
The lowest bid was at a premium of 12.4% to the lowest bid in a previous solar power tender that GUVNL had conducted back in September 2017. The lowest bid is also higher than the all-time low solar bid of Rs 2.43/kWh (4.00¢/kWh) by 22.6%. With the cancellation of the auction, GUVNL also returns the performance bank guarantees to the successful developers.
GUNVL officials blame lack of clarity on various issues at the time of bidding. Developers continue to face uncertainty over issues of anti-dumping duty, safeguards duty, customs duty, and Goods & Services Tax (GST).
Anti-dumping investigation into solar cells and modules imported from China, Malaysia, and Taiwan has been prematurely terminated as the petitioner withdrew its case. The petitioner, Indian Solar Manufacturers Association (ISMA), is expected to file a fresh petition soon. Investigation into safeguards duty against imports from the same countries is ongoing even though the investigating agency recommended a 70% interim duty. The Indian government only recently clarified its stance on the customs duty being imposed on imported solar modules. These have now been re-classified into a category that does not attract any customs duty.
While no additional duties have currently been levied on solar power projects, the developers are clueless about the future and are hedging their risks by adding the financial impact of these duties in their tariff bids. To address these fears, the Ministry of New & Renewable Energy (MNRE) issued an amended model power purchase agreement with new clauses that makes developers eligible to charge additional tariffs in case any duties are levied in the future.
Since this clarification from MNRE and the decision on the customs duty came after the GUVNL auction was completed, it seems fair that developers are allowed to bid again with this new information at hand, which would likely reduce the tariff bids.