Tamil Nadu Tender Receives Unenthusiastic Response

• There is little interest so far in Tamil Nadu Generation and Distribution Corporation Limited's (TANGEDCO) tenders it floated for 500 MW solar power capacity in October 2016
• Reports say interest received for only 116 MW capacity from small developers
• TANGEDCO believes developers are facing cash crunch owing to demonetization in India
• Industry experts point fingers at TANGEDCO not addressing grid curtailment and payment delay issues making developers stay away from its projects

Tamil Nadu Generation and Distribution Corporation Limited (TANGEDCO) has not seen a very warm response to its 500 MW PV tender launched in October 2016. It received 20 bids for a cumulative capacity of only 116 MW from smaller developers.

TANGEDCO had floated tenders through a reverse auction with a benchmark tariff of 5.10 INR per kWh ($0.076) without accelerated depreciation. Speaking to clean energy consultancy and research firm Mercom Capital Group, a TANGEDCO official blamed demonetization as the reason behind solar developers grappling with cash issues, that has led to 'unrest' in the market. Nonetheless, the agency is likely to award contracts to successful bidders by mid of December.

However, Mercom thinks it is because of the reputation that Tamil Nadu carries with its curtailment issues. CEO Raj Prabhu had commented earlier, "TANGEDCO is a high risk off-taker due to their history of late payments and curtailment. Companies that plan to bid for these projects will be doing so at their own risk."

Another research and consultancy firm Bridge to India (BTI) points out that the state had listed very stringent criteria for this particular tender, such as owning land at the time of bidding and fully commissioning projects within 10 months of PPA execution. This, along with no timely redressal of the grid curtailment and payment delay issues resulted into the tender being so under-subscribed. It says payments to power producers have been delayed by as much as 18 months in the past.

BTI suggests, "Tamil Nadu needs an urgent reform of its power sector operational and financial organization. In the meantime, it would be much better off by procuring new renewable capacity through NTPC or SECI, which would enhance off-take bankability, reduce project risk for
developers and bring down power cost for consumers."

Out of the 834 MW of PV capacity tendered in India in October 2016, TANGEDCO had reportedly tendered the highest capacity at 500 MW (see India Tenders 834 MW PV In October).