The SECI has floated a tender for the allocation of 2 gigawatts of solar PV capacity across the country. The tender gains significance due to its size — being one of the largest floated at the national level — and the direct involvement of SECI in power procurement.
Prospective project developers will be free to chose the location for the development of the projects. The maximum tariff bid that project developers can place is Rs 2.93/kWh (¢4.6/kWh) which is highly competitive as the lowest solar power tariff in India is Rs 2.44/kWh (¢3.8/kWh).
While the project developers will have to scout for project sites, as opposed to locations being offered in earmarked solar parks, the tariff bids are expected to be highly competitive. The provisions of the tender are very clear compared to previous tenders.
Successful project developers will sign power purchase agreements (PPAs) with SECI, a government entity which will boost confidence among lenders to the projects. SECI will charge a trading margin of Rs 0.07/kWh (¢0.001/kWh) and sign back-to-back PPAs with utilities interested in buying solar power.
A similar model was adopted in the wind energy tenders floated and executed by the SECI last year. This model has been in practice for some of the earlier utility-scale solar power projects allocated under the National Solar Mission, but this would be the first time when SECI would act as a ‘trader’ of solar power.
The tender clearly defines the performance criteria project developers need to adhere to, as well as a penalty on lower-than-expected power generation. If project developers generate excess electricity, SECI may procure it at a slightly reduced tariff and the developers would not have scout for alternate market avenues for the sale of excess power.
Availability of transmission capacity for rapidly increasing renewable energy capacity remains a challenge in India. Several solar and wind energy developers have complained in the recent past that utilities have asked them to reduce generation citing lack of transmission capacity in the grid. The tender outlines a compensation mechanism for such conditions as well.
All in all, it would be a highly interesting auction given the clear terms and conditions, the involvement of a trusted government entity like SECI, and the recent rise in prices of imported modules.