AIN’T NO SUNSHINE HERE – TN Pulls the Plug on Solar Auction

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Tamil Nadu has cancelled an auction it held in January-February to allot 500 MW of solar projects, because the state-run power distributor found the winning bid of `4.40 per kwH too high, one of the developers said.

The developer, who had won a contract in the January-February auction, said this was verbally communicated to him, followed by a letter asking his company to take back the bank guarantee it had submitted.

“You are requested to collect the bank guarantee from this office on any working day,“ read the letter dated September 12 from the chief engineer, non-conventional energy sources at the Tamil Nadu Ge (TANGEDCO), which conducted the auction. ET has seen a copy of the letter.

TANGEDCO, however, has not made any official announcement of this. Its officials were unavailable for comment.

The 500 MW auction, for which TANGEDCO had set a reserve price of `4.50 per kwH, had response, with 20 de evoked a tepid response, with 20 developers putting in bids for only 292 MW, all quoting tariffs between `4.40 and `4.50. The largest and lowest bidder was Rays Power Infra, which offered to set up 100 MW at `4.40 per kwH.

TANGEDCO informed all the bidders that their proposals would be considered only if they matched the lowest bid of `4.40. All but one of the 20 agreed to do so, but the applications of three were rejected for various technical reasons.

This left 16 developers who were set to put up solar projects of 224 MW in the state at a tariff of `4.40 per kwH. In April, TANGEDCO approached the Tamil Nadu Electricity Regulatory Commission for approval of the uniform rate of `4.40 per kwH, which it received in June. The state regulator also directed TANGEDCO to complete signing the power purchase agreements with all the winners within a month and submit copies to it.

But this was never done, as in the months between February and June solar tariffs at various other auctions in the country began dropping steeply, mainly because a fall in the cost of solar equipment.The lowest price achieved was `2.44 per kwH at an auction conducted by Solar Corporation of India at the Bhadla Solar Park in Rajasthan, which gets the best solar radiation in the country. TANGEDCO itself conducted a second auction for 1500 MW, whose bids, opened in early July, showed the lowest bid at `3.47 per kwH.

Since then, TANGEDCO had been trying to get the bidders in the earlier auction to reduce their tariffs from `4.40 to `3.47 per kwH.“They won’t put anything in writing, but that is what they want,“ one of the developers told ET. (See ET, August 16.) The developers kept resisting it, maintaining that such a major reduction in tariff would render their projects unviable.

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