Indian solar auction stumbles on price, but mostly location

While India is supposed to be growing its solar power astronomically, it has its fair share of government inspired failures, due to the ridiculously low prices that government agencies tend to expect.

Another solar auction there has failed this week, run by NTPC (the National Thermal Power Corporation) which was after 1.2 GW of bids in 50 MW increments up to 600 MW, but which attracted zero bidders.

Once again it is the threshold pricing of 2.78 India Rupees per kWh, which amounts to  3.91 US cents. Additionally the NTPC asked developers to set up projects close to its existing sub-stations in western and central India. Developers don’t sit around preparing bids based on a particular auction – they begin with rights to land, then run through the connectivity options, then the logistics and costs of the build out, and cost to run operations. And it is only then that they look to use an existing development in one of these auctions. So in a sense this auction was designed to fail.

So the NTPC has done the only thing it can, the traditional response, of extending the deadline and waiting for bids  – it has already extended the deadline twice before, so this is like doing the same thing and expecting a different result (The definition of stupidity).

The Solar Energy Corporation of India (SECI) has managed to introduce a maximum thresholds and developers have still taken part but this is because under SECI auctions developers can set up projects anywhere in India.

Last week SECI put out a 1.2 GW tender for renewable energy plus storage, but we have yet to see reactions to this auction – hopefully it will attract more attention than previous hybrid auctions.  These bids also had a minimum off peak energy price of 2.7 Rupees per KWh (4 cents) but the peak price goes to the lowest bidders in a two envelope reverse auction.

The technology for the Energy Storage technologies is to be agnostic although there are safety specifications for Lithium Ion and Nickel technologies listed, so it is assuming most will be Lithium. We would not be surprised to see Vanadium Flow systems bid in this auction also.

The last two wind energy tenders in India have also been significantly undersubscribed and the government has made crucial changes to the conditions of wind energy tenders issued by SECI, which included issues related to land acquisition, penalties on generation shortfall (which was 75% of energy produced and is now 50%), and rewards for early commissioning of projects. The government also changed the period until the commissioning of the work to 18 months.