India’s Tamil Nadu state cancels 500 MW of solar projects

The southern Indian state of Tamil Nadu has cancelled a 500 MW solar auction it held in Jan-Feb of 2017. Local financial newspaper the Economic Times reports that the reason for the cancellation of the auction was the fact that the state-run power distributor, Tamil Nadu Generation and Distribution co (TANGEDCO), found the winning bid of INR 4.40 ($0.067)/kWh too high.

This information, according to the article, was confirmed by one of the winning developers, which received a back guarantee return letter dated September 12.

TANGEDCO, however, has not made yet any official announcement on the matter.

In the auction held at beginning of this year, TANGEDCO had set the reserve price of INR 4.50 ($0.069) /kWh, which had garnered a warm response, where 20 developers bid and quoted the tariff in the range of INR 4.4 – 4.5/kWh for only 292 MW.

The largest and lowest bidder was Rays Power Infra, which had offered to set up 100 MW at INR 4.40 ($0.067)/kWh.

The power distributor later asked all of the developers to match the lowest bid, which resulted in three developers exiting the process. This left only 224 MW for 16 developers agreeing a solar tariff of INR 4.40 ($0.067)/kWh.

However, up until June the PPAs were never signed. This delay was also caused by a further decline in prices for solar in India registered during the period, the lowest of which, INR 2.44 ($0.04)/kWh, was recorded in May for the Bhadla Solar Park in Rajasthan. In July, the Tamil Nadu distribution company itself conducted an auction for a 1,500 MW solar project, which received one of the lowest bids thus far in India of INR 3.47 ($0.05)/kWh.

Thereafter, the TANGEDCO asked the developers to reduce their bid to INR 3.47 ($0.05)/kWh for projects auctioned off in the Jan-Feb tender. Most of them, however, said that such a tariff reduction would have made their projects unviable.