BCD imposition impact: 21 paisa/ unit rise in solar tariffs in recent GUVNL 500 MW tranche XII auction
In the series of GUVNL (Gujarat Urja Vikas Nigam Limited) auctions, Rs 2.20/kWh bid of the GUVNL 500 MW Tranche XII auction became the second lowest winning tariff. The L1 bid had been quoted by 4 companies – Sprng Energy, NTPC, Coal India and TP Saurya (Tata Power’s wholly-owned subsidiary). This is about 11% more than the record-breaking tariff of Rs 1.99/kWh seen in earlier conducted GUVNL 500 MW tranche IX auction in December 2020.
The tender by GUVNL for solar power purchase of 500 MW capacity under Tranche XII was floated this year in January. The tender received a good response from the bidders and was oversubscribed by about 510 MW of capacity. The project commissioning timeline specified in the tender is 18 months from the date of execution of PPA and the minimum requisite CUF is 17%.
This is the first auction that has been conducted after the announcement of imposition of Basic Customs Duty on imported solar modules and solar cells of 40% and 25% respectively, w.e.f April 1, 2022.
Apart from the 4 L1 bidders, the other project winner, SJVN, which quoted Rs 2.21/kWh (L2 bid) for 100 MW capacity, won 70 MW under the bucket filling method. Other participants included Ayana Renewables , ReNew Power, Aljomaih Energy & Water Company and Juniper Green Energy.
The distinctive presence of Tata power in the game who has been a consistent winner in the series of GUVNL auctions is worth mentioning here as the total pipeline capacity of Tata Power is, now, 550 MW+ capacity, after the latest win. NTPC, SJVN and Sprng Energy have won for the second time, whereas, Coal India Limited (CIL) is the novel winner in this series. As part of its long-term plans, CIL has announced that it would invest Rs.56 million ($763 million) in 14 solar power projects by March 2024. CIL has also proposed to invest Rs 26,000 crore in solar wafer manufacturing market.
The tariffs were comparatively lower mainly because of:
- Good ratings of Gujarat State DISCOM
- Choice of project location for developers
- Anticipation that mono PERC module prices would fall 10-15% to reach USc19-20/Wp (watt peak) by 2022 (excluding duties and taxes).
Figure 1: GUVNL 500 MW Gujarat, Solar (Tranche XII) Auction Result
Source: JMK Research
Also, this time GUVNL had asked the bidders to consider the BCD factor on solar cells and modules before placing the bids as there will be no scope of availing passthrough under “Change In law” provision. According to JMK Research, imposition of 40% BCD is likely to increase in solar tariffs by 40-45 paisa per unit. However, on ground with same conditions as that of previous GUVNL tranche IX tender (lowest tariff of Rs1.99/ unit), this time the L1 tariff is Rs. 2.2 per unit. This is quite an aggressive quote, ensuing a renewed thrust in the industry.
Figure 2: Tariffs trends with imposition of BCD and Safeguard duty (SGD)
Source: JMK Research