Defer Bids Until Power Sale Agreements Backlog is Cleared – Solar Developers to Minister
PPAs have been signed for only 4 GW of renewable projects of the 25 GW auctioned in the last 15 months
The Solar Power Developers Association (SPDA) has written to Union Power Minister R.K. Singh asking to stop new auction activity for solar projects until the backlog of power sale agreements is cleared for projects scheduled to be commissioned in the next two years.
The association has requested the creation of a central coordination forum to monitor the progress of bids and guide agencies with an integrated strategy to connect power procurers and distribution companies (DISCOMs).
In a letter to the Power Minister, the SPDA said that central public sector units (CPSUs) had auctioned nearly 25 GW of solar projects over the last 15 months. These projects had received an enthusiastic response from the independent power producers. However, power purchase agreements (PPA) had been signed for only about 4 GW of the projects.
The association explained that despite a significant backlog of unsold power from renewable energy projects – solar, wind, and hybrid projects – bids and auctions were still being held, adding to the backlog. This had led to confusion among DISCOMs due to the differing timelines and tariffs of the projects.
The manufacturing-linked solar auction by the Solar Energy Corporation of India (SECI) resulted in a tariff of ₹2.92 (~$0.04)/kWh while SECI Tranche-VIII and IX discovered tariffs of ₹2.50-₹2.51 ($0.0348-$0.035)/kWh and ₹2.36 (~$0.0313)/kWh respectively.
The 5 GW of solar projects by CPSUs was announced later with a ceiling tariff of ₹2.20 (~$0.03)/kWh. The CPSUs have been offering solar power to DISCOMs in advance for ₹2.20 (~$0.03)/kWh, which has added to the confusion as these projects are offered a capital subsidy or viability gap funding of ₹7 million (~$95,725)/MW by the government.
While the central subsidy offered to bring down the tariff was positive for the sector, DISCOMs had no clarity on the value proposition of bids for different projects since they only get ‘plain vanilla solar power’ from these bids.
The situation was exacerbated as developers who won projects continued to incur expenses in the form of interest during construction or hedging costs while waiting for PPAs to be signed. This was making the projects less attractive to investors as the cost only increased with time.
The SPDA recommended suspending recent tenders totaling over 10 GW until a substantial portion of the backlog to sign power sale agreements is cleared.
These tenders included the Solar Energy Corporation of India’s (SECI) tenders for 1,785 MW of solar projects (Tranche IV) in Rajasthan, 1.2 GW of ISTS-connected wind projects, and 2.5 GW of round-the-clock power from grid-connected renewable energy power projects. The SPDA also added the Indian Renewable Energy Development Agency’s 5 GW solar tender (Tranche III) under the CPSU program (Phase II) to the list.
Mercom has earlier written about how unsigned power sale agreements are a major hurdle for solar growth in the country.
Mercom’s flagship event Mercom India Solar Summit, to be held virtually on April 8th and 9th, has an exclusive session to discuss “Policy Flip Flops Between Intention and Action – The Cog in the Solar Growth Story.” The panelists will discuss about unsigned power sale agreements, renegotiating power purchase agreements, cancellation of auctions, and misinterpretation of clauses, the bottlenecks, and possible solutions. You can click here to register for the event.
Nithin Thomas is a staff reporter at Mercom India. Previously with Reuters News, he has covered oil, metals and agricultural commodity markets across global markets. He has also covered refinery and pipeline explosions, oil and gas leaks, Atlantic region hurricane developments, and other natural disasters. Nithin holds a Masters Degree in Applied Economics from Christ University, Bangalore and a Bachelor’s Degree in Commerce from Loyola College, Chennai. More articles from Nithin.