Concerted efforts are needed to raise the annual variable renewable energy tender issuance to over 35 GW in the next few years to achieve India’s 2030 targets, according to a joint report by the IEEFA (Institute for Energy Economics and Financial Analysis) and JMK Research & Analytics.
Currently, renewable energy tendering activity in India is not in tandem with government targets. Annual tender issuances have fallen by 30 per cent, from 40 GW in 2019 to about 28 GW in 2022. This 28 GW per year is not enough to meet the target of 450 GW of renewable capacity by 2030, up from 122 GW now.
Need of the hour
“But with tendering authorities looking to design tenders that balance the needs of the developers and the electricity distribution companies (Discoms), more than 35 GW per year, although ambitious, is attainable. It is now important that Solar Energy Corporation of India (SECI), NTPC, and State agencies deploy their tendering experience to implement viable and innovative tenders in the renewable energy space,” Vibhuti Garg, Director, South Asia, IEEFA, said in the report.
The slow uptake of renewable energy tenders is primarily due to Discoms’ financial issues, leading to under-subscription and tariff renegotiation. The wind sector, in particular, is reeling from supply chain disruptions and increase in project capex, leading to caution and less bid participation from developers.
Discoms want firm power from sources like wind-solar hybrids or renewables coupled with energy storage. So while plain vanilla solar and wind tendering has decreased, new-age renewable energy tender issuances have increased.
Overly aggressive bidding by developers has increased their cost pressures, and as a result, their interest in recent tenders has waned.
“Aggressive bidding and a failure to foresee a 30–40% rise in solar module prices have slowed developer participation due to the unviable prices that some reverse auctions discover,” said Prabhakar Sharma, Consultant, JMK Research.
In a positive development for the wind sector, the government is planning to remove reverse auctions from wind tenders in favour of closed bidding. Returning to closed bidding will result in the discovery of financially viable tariffs that reflect current market conditions, reinvigorating interest and participation in future wind bids.
The poor financial health of Discoms, leading to payment dues and renegotiation of already executed contracts in certain States, is also discouraging developers from participating in tenders. Payment security mechanisms need strengthening to remove concerns over delayed payments.
While some States have already achieved their renewable purchase obligation (RPO) targets, others continue to rely on conventional thermal power. So, increasing RPO targets as well as stringent RPO compliance would help drive the issuance of new renewable energy tenders.
Also, pooled tariffs, implemented during certain control periods, would allay the DISCOMs’ fear of missing out on lower renewable energy tariffs in the future and hence address the delays in signing power supply agreements.
There is a sense of optimism in the market that the worst may already be over and that more than 35 GW of annual tendering will be achievable in a few years, it added.