Rs2.44 solar bid equalled in Gujarat – but is it viable?

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Solar industry fears the recent panel import duty and general sales tax double whammy would drive up solar electricity prices appear to have proved groundless in the wake of the latest Gujarat tendering exercise.

Gujarat Urja Vikas Nigam Ltd (GUVNL) made headlines in February when it cancelled a tender that prompted tariff bids of Rs2.93-3.06/kWh from developers. Although the state utility did not announce the official reason for its decision, analysts speculated the anomalously high tariffs that resulted spooked the power provider.

It is being reported the second attempt to allocate 500 MW of new solar capacity generated offer bids of Rs2.44-2.88/kWh, apparently vindicating the utility and flying in the face of predictions tariffs would rise in the wake of a legal ruling supporting the federal government’s decision to impose a 25% safeguarding duty on imported Chinese and Malaysian solar panels. That blow for developers was followed by the news general sales tax of 18% would be levied on the subcontracted construction services provided during the development of PV projects.

Is record low tariff too low?

Rather than frighten off potential bidders, the Gujarat tender reportedly had them flocking for a piece of the action, with 19 developers submitting bids for 1.9 GW of capacity, and with projected PV schemes ranging from 30 MW in size up to a bid from Azure Power for the whole 500 MW.

Whether the New Delhi developer will be able to make the 100 MW it eventually secured economically viable will be interesting to see, given the same developer had suggested a Rs3.06/kWh price for the 250 MW it bid for in the previous tender.

The fact Azure this time lowered its tariff to Rs2.45/kWh demonstrates the bind developers are in, thanks to India’s aggressively applied reverse auction tendering process – a system which has led to concerns over the quality of some PV projects.

Perhaps more telling is the fact that although the majority of India’s big PV players were represented among the 19 bidders – including Orange Renewables, Eden Renewables, Canadian Solar, Adani Green Energy and Tata Power – there was no sign of Acme Solar, which saw the record lowest Indian tariff price of Rs2.44 it set in neighbouring Rajasthan equalled by two bidders in the latest tendering exercise. Does Acme know something it’s newly-annointed Rs2.44 rivals Aditya Birla Renewables and Avaada Power don’t?

Aditya and Avaada each secured a 200 MW slice of the allocation, in an auction in which SB Energy was also notable by its absence.