SECI finds prices too hot to handle, cancels multiple allocations

India’s solar dreams will not come easy. In a move that, despite some inkling of it, was still shocking to the industry, the Solar Energy Corporation of India (SECI) has decided to cancel all the allotments for the winners in its mega solar auction of July 13. The only firm to avoid the cull is Acme Solar, which retained its 600 MW allotment, for which it had quoted Rs 2.44 per unit cost.

The rest of the 2400 MW, won by SB Energy, ReNew Power, Mahindra Solar, Mahoba Solar (Adani Group),  Azure Power and Rutherford Solar Farms, which had the smallest allotment of 200 MW. The ostensible reason for the cancellation of these other developers is the wide gap between their quotes and the winning quote of Rs 2.44 from ACME Power.

At IamRenew, we had pointed out our view, after a discussion with officials at SECI that the sole focus of the SECI is on lowering tariffs, nothing else. To that extent, this move is not a huge surprise. The only surprising element, if at all, might be the fact that they have allowed ACME to continue, as they typically have been cancelling full auctions where price discovery has been higher than their expectations.

This cancellation by SECI sends out an ominous signal to the industry, as, with safeguard duties on imports from china in force, the target tariff rate of Rs 2.44 to Rs 2.60, which seems to be the non-official comfort zone for SECI, will be very difficult to achieve.

Other states have also not held back, with Uttar Pradesh, and Gujarat cancelling auctions too, due to higher prices than expected. It’s clearly another attempt to browbeat the industry into offering lower rates, as the government seems to be under the impression that players will do it for capacity augmentation and marketshare. It’s a shortsighted move, and save for the really deep pocketed players like Softbank backed SB Energy and Renew Power to an extent, could create serious growth issues for the other developers.  In an indusry already operating under a massive policy overhang of government control and tariffs, the latest move will probably drive the industry towards more consolidation and an attempt to find a common voice to negotiate with the government.

From generation, to distribution, to billing and even collections, there is a government agency at every stage to deal with. We areyet to find any industry sector that did well from this level of closeness with the government. Especially in a global context. If you can think of any, feel free to tell us at feedback@iamrenew.in

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