UPNEDA’s (Uttar Pradesh New and Renewable Energy Development Agency) 1GW solar PV auction saw a rise in solar tariffs, with the lowest bid being Rs.3.48 per Kwh. The L1 tariff in this auction is Rs.3.78 (~$0.011)/kWh, which is more than the Rs.2.70 (~$0.039)/kWh quoted for SECI’s recent solar auction.
The 1GW capacity was tendered by the UPNEDA in January 2018. This tender was oversubscribed by 870MW, indicating a growing interest by the developers.
This auction enabled the developers to submit multiple bids based on the location of the project. Mahoba Solar (UP) Private Limited (Adani) quoted the L1 tariff of Rs.3.48 (~$0.050)/kWh to develop 250 MW of projects (Adani quoted a single tariff for all of the project locations).
Other bids included; Maheshwari Mining & Energy Private Limited (MMEPL) who quoted Rs.3.48 (~$0.050)/kWh to develop 20 MW and ACME Solar Holdings who bid Rs.3.54 (~$0.0515)/kWh to develop 150 MW of solar PV projects and Rs.3.55/kWh to develop another 150 MW worth of solar PV projects.
As per reports, the bidders claim the high tariffs to be a result of Uttar Pradesh’s low Capacity Utilization Factor (CUF), which is 20% lower than that of Rajasthan or any other sunny state. The low or poor rating of the discom UPPCL has also strongly contributed as this raises the cost of borrowing developers. Moreover, officials believe the 13-month project deadline to have also played a part in the price rise. Land prices are of course a factor too in UP, with its better, and more expensive land.
The tariffs also seem to indicate that solar tariffs, at least for now, have hit their bottom, and any further reductions look difficult.
IN an industry powered by equity and debt funding, the recent increase in rates is a definite cause for concern too, as developers counting on debt financing factor in the higher cost of funding. That is one of the key reasons the industry has witnessed consolidation too, with the more well-funded firms snapping up assets recently, a process that too could run its course very soon if there are any significant hikes from here on.