Categories: Green EnergyNews

Tariff Bids Stay Low in UP Solar Auction, NTPC Quotes Rs 3.04/kWh

The latest auction results of 550 MW held by the Uttar Pradesh government produced winning tariffs close to Rs 3. Held by the UP New and Renewable Energy Development Agency or UPNEDA,  bids for the 550-MW solar projects saw bids ranging from Rs3.04 to Rs3.08 per kWh.

State-owned maharatna company NTPC won the bids by quoting 3.04 per unit for 85MW. Other winners of Monday’s auction include Adani Green Energy and Tata Power Renewable Energy. The UP agency had put Rs 3.10 as the tariff cap for the auction, and the bids received were lower than the tariffs of Rs 3.17 quoted in October. NTPC and Adani group were the winners of the October auction.

Despite many bid extensions and incentives put in place by the UP government, solar developers maintain that the price will not go below the Rs 3 mark as the solar irradiance in the state is lower than other states like Gujarat and Andhra Pradesh. This has been a consistent reason cited for the relatively higher bids UP based auctions have always received.

Other factors like Safeguard duty that came in effect this July has also driven the developers to wait out at least 6 months before signing any new Power purchasing agreements. The current PPA will be signed in 90 days which means that the winning party will have till December 2022, roughly about 21 months, to finish the project. By that time the safeguard duty applied will lower to 20% from a current 25%, making the imports of solar panels cheaper, as they progress.

Indian solar manufacturers have yet to develop a domestic capacity to manufacture these PV panels in such huge quantities and at a competitive price range. Even the quality manufactured here is not at par with the international panels. This has been the major reason, as to why the solar players have stayed away from Solar project auctions in the past several months. Add the price cap directive by the government, to the fray, and a recipe for disaster was ready that took the wind out of the solar industry.

On the other hand, UP government did show some respite and avoided putting the Tariff Cap clause in one of its auctions. This was after it canceled off 1000 MW auction in July where tariffs were peaking between Rs 3.48-3.55 per unit.

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