India needs to re-think policies amidst flopping solar auctions: analyst

The 1GW Gujarat solar PV tender for Dholera Solar Park only got two bids for 300MW capacity.

Recently, the 1GW Gujarat Solar photovoltaic (PV) tender for Dholera Solar Park was undersubscribed by 700MW and received only two bids for a total of 300MW capacity. According to GlobalData, this signals the need for policy re-thinking.

Since 2018, nearly 5GW of solar PV auctions have been cancelled by various government agencies in different states of India. Tarun Bhutani, power analyst at GlobalData, commented, “Agencies insist on bringing down solar tariffs but factors such as a 25% safeguard duty on imported solar panels, differential goods and services tax (GST) rates and rupee depreciation have led to shrinking profit margins for developers. This was the primary factor for the slowdown in solar PV installation as the annual installation in 2018 was 8.69GW in comparison to 9.57GW installation in 2017.”

“Although this slowdown can be temporary, as the long-term trend of the falling cost of PV modules remains intact; still these auction cancellations and re-tenders have resulted in a lack of interest amongst developers and investors,” the analyst added.

Moreover, auctions with an upper tariff limit have also been cancelled in the past, which prompts the need to create specific pricing methodology to determine a tariff. “A transparent and market-based auction process can help to win back the confidence and interest of project developers; otherwise a target achievement of 100GW solar installation by 2022 seems very challenging,” he added.