- Gujarat Urja Vikas Nigam Ltd. (GUVNL) has canceled a 500 MW grid-connected PV project auction it concluded this March
- A difference of 0.33 INR ($0.005) per kWh between the lowest winning bids in the previous and recent 500 MW tenders conducted by GUVNL is the reason behind the cancellation, according to Indian consultancy Mercom
- GUVNL blames a fear of safeguard duties being imposed, leading developers to factor costs into their proposed tariffs
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A 500 MW PV auction concluded by India’s Gujarat Urja Vikas Nigam Ltd. (GUVNL) has been scrapped. High tariffs quoted for the capacity was the reason behind the cancellation, reports Mercom India Research.
GUNVL had tendered 500 MW of grid-connected PV capacity in February 2018, with an additional 500 MW as a greenshoe option. Gujarat, India-based infrastructure development firm Kalthia Engineering and Construction Ltd. offered and won 50 MW of capacity for the lowest bid of 2.98 INR ($0.0456) per kWh (see GUVNL 500 MW Tender Results).
Now, GUVNL has decided not to sign the power purchase agreements (PPAs) owing to the winning tariffs being too high. Compared to the previous 500 MW auction held by GUVNL in September 2017, where the lowest winning bid was 2.65 INR ($0.0413) per kWh, the lowest bid was 0.33 INR ($0.005) per kWh higher.
Speaking to Mercom, a GUVNL official blamed the higher tariffs on the impending safeguard duty, which developers seemed to be factoring in while bidding for projects. GUVNL now will seek clarity on safeguard duties and pass-through options from the central government. After that, it may re-tender the capacity, but without any viability gap funding (VGF).
“This is just an example of what will happen if safeguard duty is imposed,” said Raj Prabhu, CEO of Mercom Capital Group. “This also sets a bad precedent for other states to cancel if they don’t like the auction price. Essentially Gujarat is saying don’t price the safeguard duty risk in your bids,” he added.
Safeguard duty fears have become more tangible as the Madras High Court has quashed a petition filed by Shapoorji & Pallonji against the recommended 70% safeguard duty (see Petition Against Safeguard Duty Dismissed).