Winning tariffs in Gujarat’s latest solar reverse auction showed significant increase over those in its last auction in September last year, lending further credence to the view that solar tariffs have bottomed out.
The lowest bid in the 500 MW auction conducted by Gujarat Urja Vikas Nigam Ltd (GUVNL) on Wednesday came from Kalthia Engineering and Construction Ltd, which sought and won 50 MW at a tariff of Rs 2.98 per unit. Kalthia is a Gandhinagar-based group, with diversified interests including heavy engineering, construction, renewable energy and hospitality.
Other winners were Gujarat State Electricity Corporation (GSECL), which has also turned developer, and which won 150 MW at Rs 3 per unit, Acme Solar Holdings, which won 100 MW at Rs 3.06 per unit and Azure Power, which got 200 MW at the same price of Rs 3.06 per unit.
In the last solar auction held by GUVNL in September 2017, also for 500 MW, winning tariffs had varied between Rs 2.65 and Rs 2.67 per unit. GSECL and Azure Power had been among the winners in that auction as well, picking up 75 MW at Rs 2.66 per unit, and 260 MW at Rs 2.67 per unit respectively. This amounts to a 33-39 paise increase in solar tariff in the same state within just six months.
The lowest tariff reached so far has been Rs 2.44 per unit at a Solar Corporation of India (SECI) held auction at Bhadla Solar Park, Rajasthan, in May last year. However, tariffs have been climbing steadily since then.
Indeed, recent solar auctions by Maharashtra and Karnataka have evoked tepid response and there was much speculation as to how Gujarat’s auction would fare. GUVNL’s auction, however, was oversubscribed more than three times, attracting technical bids of 1,750 MW against the 500 MW tendered. The main reason, developers believe, is that GUVNL did not set any reserve price for the auction, but allowed them to reach their own level.
In contrast, Maharashtra State Electricity Distribution Co Ltd’s (MSEDCL) 1,000 MW auction has been postponed four times since January, with the last deadline attracting bids of only 530 MW. MSEDCL had set its reserve price at Rs 3 per unit. Similarly Karnataka Renewable Energy Development Ltd (KREDL) auction of 1,200 MW earlier this month got bids of just 550 MW after one postponement. It had set a ceiling price of Rs 2.93 per unit. While KREDL has allotted the projects bid for at prices between Rs 2.91 and Rs 2.93 per unit, MSEDCL has not yet taken any decision.
Gujarat’s solar tariffs are lower than those in Maharashtra and Karnataka because it is among the states with very high solar radiation.
Solar developers are wary about lowering tariffs too far as they have the threat of possible imposition of safeguard duty and anti-dumping duty on solar imports dangling over them. The Directorate General Safeguards has already recommended imposing 70% safeguard duty on imports to protect local solar manufacturing industry. More than 90% of equipment used in Indian solar projects is imported.
