- MNRE has issued instructions to SECI to set a cap on solar power tariffs to INR 2.68 ($0.038) per kWh in the event of safeguard duty implementation, according to Mercom India Research
- With no safeguard duty, the cap should be fixed for INR 2.50 ($0.036) per kWh
- It has also asked for future solar bids to have lot sizes of 1.2 GW, with minimum bid size of 50 MW and no maximum bid size
- These measures would bring down the gap between the top (L1) and other winning bids, and will also fetch competitive bids for government agencies
The Ministry of New and Renewable Energy (MNRE) has asked Solar Energy Corporation of India (SECI) to cap solar power tariff to a maximum of INR 2.68 ($0.038) per kWh in the event of a 25% safeguard duty implementation. Without a safeguard duty, the maximum permissible tariff will be INR 2.50 ($0.036) per kWh.
Mercom India Research says the instructions were issued after the 2 GW solar auction in August 2018 conducted by National Thermal Power Corporation (NTPC) received bids in the range of INR 2.59 to INR 2.60 ($0.0372 to $0.0373) per kWh (see NTPC 2 GW Tender Bids All Under 3.00 INR/kWh).
The letter specifies that future solar bids should be issued in lot sizes of 1.2 GW with minimum bid size of 50 MW, and no maximum bid size, according to Mercom. The reasons stated for these changes is that auctions bigger than 2 GW are considered not to result in competitive tariffs that are good enough for government agencies. At the same time, the measures are expected to narrow the gap between L1 bid and other winning bids.
Commenting on this development, Mercom Capital Group CEO Raj Prabhu calls it like a feed-in-tariff and not really a reverse auction. He believes the tariff limits do not factor in dynamic market conditions. “The downside will be that all other state and government agencies will want to set similar tariff levels no matter what the project economics are in that state and we have seen this happen over and over on the past years. The tender and auction activity typically comes to a halt after something like this is announced as agencies will now look to retender and re-auction projects,” said Prabhu.
The government has also instructed the Central Electricity Regulatory Commission (CERC) to speed up implementation of ‘pass through’ option for power companies in the wake of levying proposed 25% safeguard duty (see India Issues Instructions For Pass Through Option).