In what has come as a disappointment to most solar developers who participated in the Andhra Pradesh(AP) tender for 1000 MW project allocation, the government of AP has announced a tariff of Rs. 6.49/kWh. It may be recalled that the AP tender received very enthusiastic response(click here for more details) in comparison to the lukewarm response to the Tamil Nadu tender.
The lowest price offered or the L1 price under the AP policy was Rs. 6.49/kWh by Sunborne Energy(refer here) which will now be applicable for all the developers interested in setting up the solar plants. The workable tariff under the Tamil Nadu policy is almost similar, at Rs. 6.48/kWh(details here), but the Tamil Nadu tariff is more attractive since there is a tariff escalation of 5% every year for the first 10 years.
The recently concluded bid for Rajasthan had a lower tariff of Rs. 6.45/kWh, which was apparently not attractive to most bidders and only 75 MW of the 100 MW has been allocated so far.
Efficient Carbon, a consulting firm based in Hyderabad, in its blog, mentions that it is quite possible that very few developers will accept this tariff, and the allocation will not reach the already low 226 MW allocated reported in Tamil Nadu.
Interestingly, Surana Ventures, one of the bidders is quoted as saying that since the capital cost has been increasing in the last few months, this tariff is not workable. This is in line with what we had highlighted some time back – PV system prices are not going to go down any further(refer our article here).
The fear now is that Andhra Pradesh will also go the Tamil Nadu way – big announcement of 1000 MW, but actual allocation turning out to be disappointing low.
We will update on the topic as we get more information.
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6 thoughts on “Andhra Pradesh Solar – Tariff fixed at a disappointing Rs. 6.49/kWh”
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This is indeed disappointing. How can one expect to invest in such power plants when the IRR is not greater than 15%? Are we depending too much on RECs to get a high ROI?
Hi Madhavan
I haven’t gone through the Tamil Nadu Solar tariff but a 5% escalation every year for first 10 years sounds very unusual.
In that case, by the 10th year, the tariff will be nearly Rs 10/kWh.
Can you pls confirm the above since I find that this will end up making solar very expensive, considering that its capex is on a downward spiral.
Arun
Arun,
For the details on the 5% escalation, please refer to the tender document, section 20, page 10- http://www.tenders.tn.gov.in/pubnowtend/uploaded/TD_tne81176_solar_tender-spec-2012.pdf .
This 5% escalation makes the tariff relatively better. Let me know if you have any questions.
Madhavan
Regarding the downward spiral of capex, we are now seeing firming of prices, mainly for modules.
In AP Tender, bidding was invited for each location (total 161 locations) separately. Now the Govt. should not fix one Tariff of Rs. 6.49 for all the locations. Each location has its own peculiarity i.e. land details, costing and proximity to the transmission line. Fixing one Tariff for all the location is incorrect.
There is a news item that 34 bidders have accepted the tariff of R.6.49 fixed by GoM.
7 Bidders have accepted this without any conditions while 27 bidders have requested for consideration of some conditions.
Can we see a list of these 34 bidders who have given acceptance?