The renewable energy sector in India continues to grow by leaps and bounds year after year. Many in the industry would agree that this is in part due to the country’s successful and transparent bidding mechanism for the allocation of projects. These auctions have been responsible for creating a highly attractive and competitive market, not just for domestic but for international developers and investors as well. The result has been the development of hundreds of megawatts of project capacity through each auction. Government agencies, on their part, have been steadfast in introducing relevant schemes and guidelines for bidding or amending the existing ones as and when required. Meanwhile, these large auctions, with the help of private investments, have helped scale up India’s renewable energy capacity to 133 GW. Even today, auctions continue to be the primary drivers of large-scale capacity additions in the country, and the corporate power procurement market is growing at a rapid scale.
India boasts some of the lowest renewable power prices in the world. The country has a highly price-sensitive market, with discoms being the bulk offtakers of renewable power from these auctions, and thus, aggressive bidding keeps the tariffs low. The tariffs have gone up in certain cases post Covid due to increases in project equipment costs, supply chain issues and the implication of duties and taxes by the government. Even then, renewables remain favourable for offtakers.
A look at some of the key auctions of 2023 across the solar, wind and hybrid segments and their tariffs…
Solar segment
In 2023, India Infrastructure Research tracked 13 auctions in the solar space with a total of 10,830 MW of capacity. Interestingly, just three of these auctions have been conducted by central-level agencies – one each by the Solar Energy Corporation of India (SECI), NHPC Limited and REC Power Distribution Company Limited (RECPDCL). The remaining auctions have been conducted by state agencies – those of Gujarat, Rajasthan, Maharashtra and Assam. Gujarat Urja Vikas Nigam Limited (GUVNL) has the maximum number of auctions to its credit, which is four, with a total of 2,400 MW of capacity. While GUVNL leads in terms of the number of auctions, it is NHPC that leads in terms of capacity, with a single auction having 3,000 MW of capacity to its credit.
The lowest solar power tariffs across various auctions this year ranged between Rs 2.51 and Rs 3.92 per kWh, with an average tariff of Rs 2.86 per kWh. Assam Power Distribution Corporation Limited (APDCL) witnessed the highest L1 tariff at Rs 3.92 per kWh, and the entire 320 MW of capacity was awarded to SJVN Limited. This tariff is quite high compared to auctions in other states, where L1 tariffs ranged between Rs 2.51 and Rs 2.87 per kWh. This difference can be attributed to the smaller scale of projects as well as geographical constraints.
Meanwhile, the lowest winning tariff among the auctions conducted this year was observed in GUVNL’s auction for 500 MW of solar power projects (Tranche XVIII) in January 2023. Sprng Energy Private Limited won 200 MW with a quote of Rs 2.51 per kWh and at a bid of Rs 2.52 per kWh each, while ib vogt GnmH, Hinduja and BluPine Energy Private Limited won 130 MW, 120 MW and 50 MW respectively. NHPC’s recent 3,000 MW solar auction saw similar tariffs, with the lowest bid being Rs 2.52 per kWh, quoted by Solairedirect Energy, which won 250 MW. The seven other winning bids were all at Rs 2.53 per kWh – Avaada Energy (1 GW), Jakson Limited (400 MW), Green Infra Wind Energy Limited (300 MW), Mahindra arm Hazel Hybren Private Limited (300 MW), Apraava Energy Private Limited (250 MW), Hinduja Renewable Energy Private Limited (250 MW) and Sprng Energy (250 MW).
Meanwhile, Rewa Ultra Mega Solar Limited’s auction for Phase II of the Omkareshwar Reservoir Floating Solar Project saw the lowest winning tariff of Rs 3.79 per kWh, which is lower than APDCL’s ground-mounted project tariff. SJVN Green Energy, NTPC Renewable Energy Limited and Hinduja Renewables Energy emerged as winners in the 300 MW floating solar auction, winning 90 MW, 80 MW and 80 MW at Rs 3.79 per kWh, Rs 3.80 per kWh and Rs 3.89 per kWh respectively.
Solar power tariffs have increased slightly compared to last year’s lowest tariff of Rs 2.29 per kWh. This tariff was discovered in GUVNL’s 500 MW auction (Tranche XIII) in March 2022. Other auctions with low tariffs included SECI’s 1,200 MW auction (Tranche X) in February 2022, GUVNL’s 500 MW auction (Tranche XIV) in June 2022 and GUVNL’s 750 MW auction (Tranche XVI) in September 2022 at Rs 2.35 per kWh, Rs 2.30 per kWh and Rs 2.49 per kWh respectively. There are various reasons for the increase in tariffs this year, such as the impact of basic customs duty, supply chain constraints driving up equipment cost, currency volatility and policy flip-flops (to some degree), especially concerning the Approved List of Models and Manufacturers. Many in the industry believe that the earlier tariffs were a result of very aggressive bidding to win projects, and recent discovered tariffs are more in line with the commercial viability of projects. Market dynamics and a streamlined policy regime will ultimately stabilise tariff levels, going forward.
Wind and hybrid segment
Only four wind auctions were conducted this year, with a total capacity of 2,100 MW, out of which two were by GUVNL, and one each by SECI and RECPDCL. This capacity falls short of the planned 8 GW of bids that were to be issued each year from January 1, 2023, up to 2030, under the closed bidding system introduced for wind power this year. The tariffs for these auctions ranged between Rs 2.91 per kWh and Rs 3.58 per kWh. The lowest tariff was observed in GUVNL’s 300 MW auction (Tranche IV) in January 2023, in which Juniper Green Energy Private Limited, WYN Renewables Private Limited (EDF Renewables), ACME Pokharan Solar Private Limited, and Solarcraft Power India won 50 MW, 100 MW, 100 MW and 50 MW by quoting Rs 2.91 per kWh, Rs 3 per kWh, Rs 3.01 per kW and Rs 3.01 per kWh respectively. Meanwhile, the highest tariff was seen in RECPDCL’s recent 100 MW auction, in which both Juniper Green Energy and Avaada Energy won 50 MW by quoting tariffs of Rs 3.58 per kWh and Rs 3.59 per kWh respectively. In the case of solar power, these tariffs are higher than the wind power tariffs discovered in auctions last year.
In the hybrid space, tariffs significantly varied according to the mix of technologies, applications and business models. As large-scale battery storage uptake has recently started gaining traction in the country, the costs are still quite high, thereby impacting the costs of hybrid projects with greater storage system capacities. Round-the-clock (RTC) renewable systems and peak power supply projects require storage, and thus they have high tariffs. The tariffs for such hybrid set-ups will decrease as the costs of storage decline in the future.
Outlook
In conclusion, like previous years, 2023 witnessed a notable increase in auctioned solar capacity compared to wind power. However, the year witnessed various auctions with different arrangements of hybrid power offtake, including solar-wind hybrids, renewables with storage, RTC renewables and peak power supply. Going forward, such blended power arrangements are poised to become more popular than plain vanilla solar or wind tenders, as consumers demand balanced renewable power. Meanwhile, tariffs will keep fluctuating until policies and markets stabilise.
Khushboo Goyal
