India announces 4 gigawatts of solar, wind energy

India’s Solar Energy Corporation of India (SECI) has issued two big tenders offering a total of 4 gigawatts solar and wind energy capacity.

SECI has offered 2 gigawatts of capacity under the ninth edition of national-level solar power auctions. Developers participating in this tender will be free to set up projects at the location of their choosing. SECI will aggregate demand from various states looking to buy solar power and will act as an intermediary between solar power generators and these states.

The most significant change in this new tender is the removal of tariff caps. In the previous tender, issued in January 2020, SECI had set a maximum tariff cap of Rs 2.78/kWh (US¢3.69/kWh). Developers had been offered 1.2 gigawatts of capacity, while bidders submitted offers to set up as much as 3.5 gigawatts of capacity. Winning bids, too, were very low with high competition.

Softbank-based SB Energy, AMP Energy, EDEN Renewable (a Total-EDF JV) and Goldman Sachs-backed ReNew Power secured projects at around Rs 2.50/kWh (US¢3.31/kWh) — a discount of 10% to the tariff cap.

Despite the huge discount offered by developers and huge interest shown in the last tender, SECI has been forced to offer incentives like removal of tariff caps as several developers are struggling financially. We covered a story explaining why SECI is considering such incentives.

SECI is also offering 2 gigawatts of wind energy through another tender. This, too, is the ninth national-level wind energy tender issued by SECI. Response to the last two SECI wind energy tenders was very poor. Against a total 3 gigawatts of capacity offered in two tenders, SECI managed to auction just 920 megawatts of capacity. Tariff bids quoted by developers in these two tenders were also among the highest seen in nearly two years.

Challenges in the wind energy sector seem to be more aggravated compared to the solar power sector. A limited number of potential project sites, lack of transmission infrastructure, and a very small number of developers and manufacturers has made the sector vulnerable to lack of liquidity. India Ratings recently downgraded the outlook for the Indian wind energy sector from ‘stable’ to ‘negative’ while maintaining ‘stable’ rating for the solar power sector.

Neither of the two tenders has a tariff cap, which has been a long-standing demand from renewable energy developers. This major change in India’s renewable energy policy will hopefully be successful in bringing back developers to the auctions.