Gujarat Asks Wind Developers to Match Lowest Tariff, Only Two Agree

The tariffs must match the lowest bid of ₹2.8/kWh

July 30, 2019


The Gujarat Urja Vikas Nigam Limited (GUVNL) had requested the winning bidders in its recently concluded wind power auction to match the lowest bid of ₹2.8 (~$ 0.04). Only two out of the eight developers who bid for the projects have adhered to this request, Singapore-based Vena Energy is one of them.

The power purchase agreements (PPA) will be signed only after developers agree to this move.

Initially, there was a difference of almost 15 paise (~$0.002)/kWh between the lowest bid (L1) and the tariff quoted by the last winner (L8). This disparity was not in line with industry norms, and therefore, the request to match the lowest bid is being made. Since only 200 MW of the projects will be awarded the remaining 545 MW will be re-tendered in the coming weeks.

A GUVNL official spoke to Mercom saying, “The L1 tariff in this project is ₹2.8 (~$ 0.04) Total awarded capacity is 200 MW. The remaining 545 MW will be re-tendered as the other developers have not agreed to the move. The reason for this move is because the new tariff is not in line with the industry trend. The letter of intent and approvals are still to be finalized and are slated to be done in two weeks after which there will be more clarity in this regard.”

The total renewable purchase obligation (RPO) in Gujarat for wind energy installations is 8.05% of the total power consumed in the state. As on June 2019, 6.5 GW of wind capacity installations has been confirmed by the Gujarat Energy Development Association (GEDA).

“We had been awarded 100 MW in this project. The initial tariff we quoted was ₹2.81 (~$ 0.0407), but now we have agreed to the L1 tariff of ₹2.8 (~$ 0.04). The tariff is feasible with achievable return on investment. Most wind projects in India source their components domestically by default and therefore adhere to domestic content requirement (DCR) if any,” said an official from Vena Energy.

Recently, around 1,000 MW of wind projects were auctioned in Gujarat. Capacities were allocated in May 2019, after which the GUVNL had requested bidders to match the lowest tariff arrived at in the auction.

Mercom had previously reported on how low tariffs for wind projects are a bone of contention between the stakeholders, and the government agencies. Since the introduction of reverse auctions, tariffs have plummeted and have remained at levels below ₹3 (~$0.043)/kWh. An increasing number of state agencies have even introduced wind tenders to meet their non-solar renewable purchase obligations (RPOs).

Image Credit: Winchell Joshua, U.S. Fish and Wildlife Service [Public domain]