Rush sour: Solar mission bidding may see Round II

By Sreejiraj Eluvangal | Place: New Delhi | Agency: DNA

The government is likely to ask companies to participate in a second round of bidding for India’s ambitious solar mission after the first one threw up too many candidates.

Companies may be asked to state the lowest price at which they are willing to supply solar-generated power to the nodal agency, NTPC Vidyut Vyapar Nigam or NVVN.

While the government wanted to purchase just 650 mw of solar power from private developers in the initial phase, companies have offered to sell nearly 4,000 mw.

The biggest rush was seen in the panel-based or photovoltaic (PV) category, where nearly 14 times the requisite number of companies have applied for eligibility to sell.

A year ago, the Central Electricity Regulatory Commission had arrived at a benchmark price of around Rs17 per unit for power produced from solar plants by dividing the cost of setting up a solar plant by the number of units of power that it is likely to produce over its 25-year lifetime.

“Now it looks like there will have to another round of bidding to determine the lowest price at which companies are willing to sell power,” said a participant in the bidding process.

An NTPC official, who did not want to be named, said all the participants who qualify the ongoing technical scrutiny, are likely to be asked to submit their lowest bids.

The ‘oversupply’ came about despite the best efforts of the ministry of new and renewable energy (MNRE).

Concerned about companies making large and unrealistic bids, the ministry had set a limit of 5 mw per applicant for panel-based solar plants and 100 mw per company for steam-based solar plants.

The bids, when put together, account for nearly 2,000 mw against the 150 mw required.

The enthusiasm was slightly lower for the second type of solar plants — those based on using the sun’s energy to convert water to steam, which in turn produced power by driving turbines.

Against the targeted 500 mw, bids were received for setting up and supplying around 2,000 mw from around 40-50 companies.
Solar thermal power plants are seen as cheaper to set up, leading the electricity regulator to stipulate a lower price of Rs15.31 per unit, against the Rs17.91 promised for panel-based solar plants.

According to sources, the power purchase agreements are likely to be signed in November or December, giving a purchase guarantee to the power produced by the plants to be set up by the winners.

The 650 mw programme is itself part of the first phase of the National Solar Mission, which aims to set up 20,000 mw of solar power in ten years.

India currently has a total grid-connected power production capacity of around 150,000 mw, out of which only around 12-15 mw is solar.

The award of the 650 mw of power plants will be followed by another round of bidding early next year.

The second round will award power plants to produce 350 mw, taking the total approved capacity to 1,000 mw — just short of the 1,100 mw target set by the solar mission for March 2013.

Separately, to meet the shortfall of 100 mw, NVVN has already won over different grid-based solar projects under implementation to the solar mission. Under the ‘migration’ scheme, NVVN will ink power purchase agreements with 16 projects, accounting for a capacity of 84 megawatt, on October 15.

Industry participants, however, expect the deadline for 1,100 megawatt to be missed by a few months.

“The ministry itself is giving two-and-a-half years for the developer to set up the thermal [steam-based] power plant. That means middle of 2013, assuming that the agreements are signed by December at least,” says a participating bidder.

However, panel-based plants are expected to be ready in time as they are quick to assemble and the developers are required to set them up within 10 months of signing the power purchase agreements with NVVN.

The Solar Mission, championed by renewables-minister Farooq Abdullah, is expected to put India on the world’s solar map. India, one of the fastest growing energy consumers in the world, not only has the highest levels of sunshine in the world, but also has a panel-making capacity of over 1,000 mw.

Setting up of more and more local solar plants are expected to give a leg up to the Indian panel-making industry, which is fighting to remain relevant in the face of Chinese, US and Malaysian competition.

Industry leaders have already warned that unless the local market is opened up and local manufacturing encouraged, India will become dependent on China for its future energy needs just as it depends on West Asia for its current oil needs.

They have, however, welcomed the Solar Mission announced less than a year ago. The tariffs offered under the Mission belong to the higher end of the 2-4 cents (Rs 9-18) offered around the world for power produced from solar energy.

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