Coming in the wake of intensely competitive bidding in Rewa and Kadappa tenders, the signs are that competition for new projects is getting fiercer, particularly as the supply of new projects has slowed down in the last twelve months, reports market research firm Bridge to India.
First round of bids were submitted for Solar Energy Corporation of India’s (SECI’s) 750 MW tender in Bhadla Solar Park, Rajasthan last week. A total of 33 developers are believed to have submitted bids for an aggregate capacity of 8,750 MW – an oversubscription of almost 12 times.
Coming in the wake of intensely competitive bidding in Rewa and Kadappa tenders, the signs are that competition for new projects is getting fiercer, particularly as the supply of new projects has slowed down in the last twelve months, according to a report by market research firm Bridge to India.
"We believe that the large oversubscription in Bhadla tender is primarily due to slowdown in new tender issuance but improved credit rating of SECI is also a relevant factor," says Vinay Rustagi, MD, Bridge to India.
At the peak of tender activity in 2016, SECI tenders were oversubscribed by only about 2 times (Maharashtra 450 MW, Andhra Pradesh 400 MW) or even undersubscribed (Odisha 300 MW, Karnataka 950 MW). But growing interest from many large global and domestic solar developers in the sector combined with slowdown in new tenders is leading to a tough competitive environment for project developers.
Most of the active project developers in India including Adani, ReNew, Acme, Azure, SolaireDirect (Engie), FRV, Sembcorp, EDF, Canadian Solar, Aditya Birla, Shapoorji Pallonji, Mytrah, Fortum and Trina Solar have participated in this tender.
Welspun has made a comeback after the sale of its assets to Tata Power. ReNew, SoftBank and Saudi based Alfanar have submitted bids for the entire 750 MW capacity. Adani and SolaireDirect have bid for 550 MW and 500 MW respectively.
The Indian government’s announcement of 100 GW solar target led to a big surge in new tender announcements in H2/2015 and H1/2016 with some large states front-loading their solar power procurement programs.
Figure – Solar tender auction completion
Source: Bridge to India
"The main problem here is sustaining a high level of new solar power demand from states when many of them are facing power surplus. Solar tariffs in the sub-Rs 3.50/ kWh (US¢ 5.4) range should provide huge demand boost for solar power in the long run but ironically, lower tariffs have led to unique challenges in the short-term," the report says.
"Central and state governments are reconsidering their procurement policies leading to postponement of some tenders. Meanwhile, some DISCOMs, having completed auctions with higher tariffs (notably Jharkhand and Odisha), are now having second thoughts on signing PPA’s," it adds.BTI believes that this short-term slowdown in new projects will lead to fierce competition for upcoming tenders and a slight reduction in new solar capacity addition in 2018 before activity picks up again, Rustagi adds.