Cancelling 3 GW SECI Solar Auction Could Backfire Due to Safeguard Duty

The capacity was auctioned in July 2018


The Solar Energy Corporation of India (SECI)’s 3 GW Interstate Transmission System (ISTS)-connected solar auction stands a chance of being cancelled according to government sources and developers. In the auction, ACME emerged as the lowest (L1) bidder by quoting a tariff of ₹2.44 (~$0.0355)/kWh to develop 600 MW.

Speaking to Mercom, a top executive from one of the successful bidding developer said, “In the monthly meeting held recently, the Ministry of New and Renewable Energy (MNRE) and SECI board decided to cancel the other bids as the tariffs offered by other developers were deemed too high.”

The executive further added, “There is going to be huge repercussions for the Indian solar sector. If a state agency or state department cancels an auction, it’s a different story. But if ministry from the Government of India, (MNRE), cancels an auction, it is a big negative for the sector. The multinationals will start to rethink their India strategies.”

An MNRE official said, “Yes, the 3 GW auction stands a chance of being completely cancelled and the 2 GW auction might be cancelled except for the lowest bid, but SECI is the final authority to announce this.”

Another large bidder of the 3 GW auction said “The board of directors of SECI had a meeting to discuss this. The MNRE secretary is also a board member of SECI and all members except one of them have agreed to cancel the auction. The one board member who wasn’t at the meeting has to submit his approval or disapproval, after which the cancellation will be officially announced. If the other board member does not agree to the cancellation, the decision of the others to cancel will have to be justified and then they have to come to a consensus. Right now, everything is unsure, and it is unfortunate.”

SECI officials declined to confirm the cancellation and have asked to await official notification.

Speaking to Mercom, another developer said, “All other bids except for the L1 bid of ₹2.44 (~$0.0355)/kWh is proposed to be cancelled by SECI in the 3 GW auction with the reason being that there is a wide difference between the L1 bid and the L2 to L6 bids. SECI says that it was expecting lower tariffs after the extension of the commissioning timelines but they need to understand that these projects are not in solar parks and developers need to take the risk of land acquisition and last mile connectivity for such large projects. The sanctity of the central government bids are at stake and the transparency of reverse auctions are now questionable. This is not going to go well with the investors or developers.”

“Central government agencies contemplating cancelling 5 GW of auctions will rattle the investment sentiment in the sector. Bids are expected to go up in the upcoming auctions due to safeguard duty, so if these auctions are cancelled and retendered it is hard to see how developers can bid lower,” said Raj Prabhu, CEO of Mercom Capital Group.

There have been numerous cancellations of auctions in the domestic solar sector lately. Recently, the Uttar Pradesh New and Renewable Energy Development Agency (UPNEDA) cancelled the auction for the development of 1 GW of grid-connected solar photovoltaic projects across the state, citing high tariffs quoted by the developers.

Then in April 2018, Gujarat Urja Vikas Nigam Limited (GUVNL) also scrapped its auction for the development of  500 MW of grid-connected solar projects in the state, again citing high tariffs.

Will the SECI 3 GW Solar Auction Be Cancelled?

Image credit: Greenko