Uttar Pradesh Scraps 500 MW Solar Auction, Plans to Re-Auction Hoping for Lower Bids
UPNEDA reportedly canceled the auction hoping for lower tariffs in subsequent auctions
In a new development, the Uttar Pradesh New and Renewable Energy Development Agency (UPNEDA) has canceled its 500 MW solar auction. An official statement from UPNEDA stated that the auction has been canceled in the hope of discovering lower tariffs in new auctions. The statement also cited examples of states such as Rajasthan and Gujarat where lower bids emerged out of new auctions scrapping the old ones. The auction winners are now planning to approach the Appellate Tribunal for Electricity (APTEL) for a redressal on the matter.
“In the light of recent events, where very low solar tariffs have been discovered in Rajasthan and Gujarat and the bids invited by the Solar Energy Corporation of India, it seems very likely that a fresh bid may deliver better tariffs for consumers of Uttar Pradesh, in which case you are cordially invited to participate in the same,” read the statement issued by Bhawani Singh Khangarot, Director, UPNEDA.
Speaking to Mercom, an executive from one of the winners, said, “We haven’t received the letter of award for the winning bid. In fact, for the last six months, we have been following up with UPNEDA for the bank guarantee. On June 1, UPNEDA returned the guarantees without providing us with a valid reason.”
When asked about the future course of action, the executive said that the company was planning to move APTEL, adding that such a step by UPNEDA is detrimental for the market. “UPNEDA’s way of handling the matter was disappointing and fails to instill confidence among the stakeholders, including the investors,” he added.
“All tariffs are not equal. After ten years and 40 GWs installed since the inception of the National Solar Mission, states still do not seem to understand that. Uttar Pradesh is not Rajasthan or Gujarat. You cannot compare tariffs from one state to another unless every parameter from solar insolation to terrain, labor costs, off-taker credit ratings, auction structure, system costs, timelines, and other factors are all exactly the same, which is impossible,” commented Raj Prabhu, CEO at Mercom Capital Group.
“Based on current market conditions, if another auction were held today, the tariffs should be higher, not lower, compared to what was discovered in the February auction. The market and prices are changing every couple of weeks, and states seem to be completely out of touch with the realities on the ground,” added Prabhu.
A lot has changed since November-December of last year when the lowest bids of ₹1.99 and ₹2.00/kWh were achieved.
- A basic customs duty of 25% on solar cells and 40% on solar modules was imposed in March, which takes effect from April 1, 2022.
- The Approved List of Module Manufacturers (ALMM) has been in effect from April 10, 2021, which means it will be tough to procure cheaper imported modules.
- The second wave of COVID-19 has created severe disruptions in the supply chain in the past two months.
- The average selling prices of solar modules have risen sharply along with other components, including iron, copper, aluminum, and steel. Freight charges are high all over the world.
- The shortage of solar glass, polysilicon, and other components has still not abated.
- For the first time in five years, module prices have risen for four quarters in a row.
- Module prices could remain at these higher levels this year as component shortage, and logistical issues are expected to take 6-9 months to resolve.
A growing number of states seem to be canceling auctions in an attempt to secure lower bids, while the successful bidders look for regulatory support to prevent these improper practices by state distribution companies.
In February this year, UPNEDA had announced the auction results for the 500 MW solar projects. The auction winners were NV Vogt Singapore, Al-Jomaih-Jakson Power, Vijay Printing Press, and Talettutayi Solar Projects Eight (SolarArise).
NV Vogt Singapore had won a capacity of 50 MW at a tariff of ₹3.17 (~$0.044)/kWh. Jakson, in consortium with Al-Jomaih, had won a total capacity of 100 MW at ₹3.18 (~$0.045)/kWh. Vijay Printing Press had won a capacity of 25 MW, while Talettutayi Solar Projects Eight (SolarArise) had won a capacity of 9 MW under the bucket-filling method. Both had quoted a tariff of ₹3.18 (~$0.045)/kWh.
The tender was issued in September 2019.
A similar case of scrapped auction by GUVNL
In February this year, the Gujarat state distribution company (DISCOM) Gujarat Urja Vikas Nigam Limited (GUVNL) decided to cancel its auction for 700 MW of solar projects and retender it (Phase IX), hoping to discover a lower tariff. The DISCOM was also backed by the state electricity regulatory commission. GUVNL had invited bids for 700 MW of projects to be developed at the Dholera Solar Park in March 2020.
After GUVNL decided to cancel the letter of award, the developers filed a petition with APTEL, which directed GUVNL to extend the validity of bids in its scrapped 700 MW. Later APTEL asked the GUVNL to maintain the status quo in the scrapped 700 MW solar auction until further orders.
Consequently, GUVNL reissued the tender.
In another auction of 100 MW by GUVNL held in September last year, SJVN was declared the winner quoting a tariff of ₹2.73 (~$0.037)/kWh. In February 2021, the state regulator allowed GUVNL to retender the projects to ensure lower tariffs to be realized. In the fresh auction held for these projects, SJVN quoted a winning tariff of ₹2.64 (~$0.036)/kWh for the 100 MW capacity.
According to Mercom’s India Solar tender Tracker, UPNEDA has so far tendered around 4.55 GW of utility-scale solar projects, out of which only 1,550 MW has been auctioned, while around 2 GW stands canceled.