Solar auction winners fret over ‘red tape’ in UP as input prices surge

By: |
May 19, 2021 5:15 AM

According to the tender document, the letters of intent (LoIs) from the state government were supposed to be released within three months after the completion of the auctions.

In November 2020, a tariff of Rs 2/unit was discovered in Seci's solar auctions for Rajasthan.In November 2020, a tariff of Rs 2/unit was discovered in Seci's solar auctions for Rajasthan.

More than a year after the solar auction for 184 megawatt (MW) held by the state, Uttar Pradesh is still holding back approval for the winners to commence construction of the parks. This has caused concern among the firms, which fear their calculations could go awry as input prices have surged in the past year.

The cost of solar equipment has increased with the rise of commodity prices globally and the tariff of Rs 3.17 per unit quoted in the auction in February 2020 may not be viable for the industry any longer, industry executives say. Further delays could even lead to the companies, many backed by foreign investors, to rethink their investment proposals in the state, they caution.

According to the tender document, the letters of intent (LoIs) from the state government were supposed to be released within three months after the completion of the auctions.

The winners of the reverse auction for the said capacity were Vijay Printing Press, NV Vogt Singapore, a consortium of Saudi Arabia-based Al Jomaih and India’s Jakson Power, SolarArise which is jointly backed by funds managed by Kotak Mahindra, European Investment Bank and UK-based ThomasLloyd Group.

“With delayed issuance of LoI and lack (of) ease of doing business in Uttar Pradesh, private players who earlier had big plans to invest in the state are refraining from bidding (for) projects, considering the challenges being faced with respect to difficulty in statute clearances (and they) are already planning to move to other states,” the National Solar Energy Federation of India (NSEFI) said on Monday in a letter written to chief minister Yogi Adityanath.

“This delay is also intertwined with the risk of increasing regulatory uncertainty, which is prompting some of our members to take their investments away from the state of Uttar Pradesh,” NSEFI’s letter, reviewed by FE, added.

Of the 39,084 MW of installed solar capacity in the country, Uttar Pradesh houses 1,668 MW. Industry experts have also attributed administrative and regulatory roadblocks to solar tariffs being higher in the state compared with other parts of the country.

UP government officials were not immediately available for comment.

India has set a target to raise the capacity of installed renewable energy generation plants to 450 GW by 2030. However, if the target is to be met, the number of tender cancellations needs to reduce. Of the 143 GW of tenders floated for building solar capacities, since FY17, around 78 GW have been cancelled. The current installed renewable energy generation capacity stands at 94 GW and about 34 GW is under various stages of implementation while 30 GW is under various stages of bidding.

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