AP Govt. fixes Solar bidding benchmark tariff at Rs.6.49/unit

by Pradeep

In what can be called a disappointing update, Andhra Pradesh Government has announced that the Benchmark Price for the recently concluded Solar Bidding would be Rs.6.49/unit. While some of you reading this might immediately be tricked into thinking that this is more or less the same as that of Tamil Nadu’s Benchmark Price, please be informed that AP Solar bidding does not have year-on-year tariff escalation. This means that the tariff would be a flat rate of Rs.6.49/unit for the duration of the PPA i.e. 20 years. Though there is no official announcement yet made by APTRANSCO, this information is based on the announcement made by the Govt. further to today’s GoM meeting.

It is a well known fact that Rs.6.49/unit is the State-wide lowest bid submitted by Sunborne Energy. While it might have been pretty easy for the govt. to decide on the Benchmark Price as the lowest tariff bid received, the tariff is simply not workable for smaller projects planned to be setup by first time entrants into the industry and those who do not have access to low-cost financing. Only 2 companies – Sunborne Energy and Essel Mining – have submitted bids for under Rs.7 per unit. Even if these 2 companies agree to sign PPAs at the Benchmark Price, the total Solar PV capacity that will be added is only 70 MW (50 MW bid for under Rs.7 per unit and 20 MW by Essel Mining between Rs.7 – 7.2/unit). The following table shows the bids by these 2 lowest bidders.

AP Solar Bids with tariff below Rs.7 per unit

At this stage, it is difficult to predict who might agree to the Benchmark Price and hence the total possible capacity addition can not be assessed. However, it is not hard to predict that the total capacity that could be added at this price may not be anywhere close to TN’s 226 MW unless the lowest bidders are given opportunity to setup power plant at other locations too at the Benchmark Price.

[Details regarding the technical and commercial bids for AP Solar bidding may be be checked on our previous blogposts here and here.]

While the exact reason for the low Benchmark Price is not known, the Government sure could have taken cue from the Tariffs suggested by CERC and several other states which have recently announced RfP for Solar bidding. The following are a few good references:

  • CERC levelized tariff of Rs.8.75/unit (without AD) and Rs.7.87/unit (with AD) for 2013-14
  • Punjab set the benchmark tariff based on CERC calculations i.e. Rs.8.75/unit
  • TN levelized tariff of Rs.6.48/unit which includes 5% escalation upto year 10 thus keeping the overall levelized tariff above Rs.8
  • Rajasthan’s Benchmak Tariff of Rs.8.42/unit for the reverse bidding process that was recently concluded

Any of the above examples would have certainly suggested the Govt. what a reasonable tariff could be. The Government sure has disappointed a lot of Solar developers (newcomers and existing players) with this abysmal Benchmark Price.

More inputs from APTRANSCO/Govt. awaited.

This blogpost will be updated with latest information as and when received.

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