Gujarat is inviting tenders to set up 700 MW of solar projects in the state under the reverse-auction mechanism.
Gujarat is inviting tenders to set up 700 MW of solar projects in the state under the reverse-auction mechanism. To encourage larger participation, the state has not capped the upper limit for tariff discovery in the auctions by removing the provision for ‘ceiling tariffs’. A senior official from Gujarat Urja Vikas Nigam told FE that the ceiling tariff has been removed as “the market looked stable and we have discovered the lowest tariffs in the previous auction”.
The tender follows the auction for 500 MW of solar capacity held last month, when the state discovered the lowest tariff of Rs 2.44/unit, matching the record low rate first found in May 2017 for Rajasthan’s Bhadla projects. However, dampening the state’s delight over the discovery of such attractive rates, sources said that Azure Power, which had won 100 MW in the auction by quoting Rs 2.45/unit, has requested the state to withdraw its bids.
It may be noted that the aforementioned auction was conducted for the second time in September, after Gujarat cancelled the first bidding process held in March when the lowest tariff discovered was Rs 2.98 per unit. The reverse auction for the 700 MW tender is expected to be completed in the final week of November. About 4 gigawatts of recent solar bids have been scrapped due to high prices discovered.
As recently reported by FE, power minister RK Singh has pointed out the reluctance of the states towards buying solar power, stating that even if the states agree to buy solar power at the lowest tariff of Rs 2.44/unit, they effectively end up paying Rs 4.04 for every unit electricity. The quantity of intermittent renewable power procured by the states are usually done by refusing the offtake of equivalent capacity of thermal electricity from power plants tied-up with existing power purchase agreements (PPAs).
Under PPA conditions, the states end up paying for the fixed-cost component, notwithstanding the the amount of electricity being sourced from thermal power plants.