New Delhi: With tenders for renewable energy projects and low tariffs continuing, these bids would only be feasible through a miraculous drop in panel costs, according to Bridge to India.
According to the consulting firm for renewable energies, the tenders were heavily oversubscribed due to tight auctions and the high level of investor interest.
"The tariffs have fallen compared to the previous year, despite the collection of the basic tariff (BCD) on solar cells and modules, the higher equipment prices and the implementation of the approved model and manufacturer list … viable," it said.
She added that seven auctions with a total capacity of 3,950 megawatts (MW) had been completed in just seven weeks and strong interest in bids had led to further tariff cuts.
Recently, Solar Energy Corporation of India (SECI) discovered a record low tariff of Rs 2.34 to Rs 2.35 per unit for wind-solar hybrid projects in its 1,200 MW auction with NTPC, Ayana, NLC and Azure.
“The tariffs have fallen by 3 percent compared to the last SECI solar wind hybrid auction in December 2020,” said the consulting firm.
Madhya Pradesh's 500 MW solar auction received bids from Rs 2.14 to Rs 2.15 per unit, another new lower tariff since BCD's announcement.
Bridge to India added that bid interest in tenders from utility companies is near all-time highs. “Tenders are regularly five to six times oversubscribed as developers strive to win projects. In the twelve months to July 2021 there was a sharp slowdown in auctions, ”it said.
Tight auctions, an enormous backlog of unsigned power purchase agreements from last year and strong investor interest have distorted the supply-demand relationship.
There were up to 22 unique bidders in the seven auctions. Aggressive bids from NTPC and other network components have increased bid pressure. Government tenders with a higher acceptance risk are also sailing through again.
Solar tariffs have been largely in the range of Rs 2.30 to Rs 2.40, lower than most of last year. This despite a levy of 25 to 40 percent BCD on solar cells and modules, an equipment price that has risen by more than 10 percent, the introduction of ALMM and a higher risk of acceptance.
"All recently tendered projects face uncertainty in sourcing modules, with likely prohibition of using imported modules," said Bridge to India.
It added that it was difficult to justify winning bid levels. Because investment excitement was ahead of fundamentals and clouding objective risk assessment. In order for these projects to be viable, equipment prices would have to be reduced by 35 to 40 percent.