In Short : SECI’s (Solar Energy Corporation of India) Floating Solar and Renewable Energy (FDRE) tender has discovered a tariff of ₹4.98 per unit. This tariff reflects the competitive pricing achieved in the renewable energy sector and highlights the growing viability of floating solar and hybrid energy projects in India, contributing to the country’s renewable energy expansion.
In Detail : Mumbai : The outcome of Solar Energy Corporation of India’s (SECI) renewable energy tender for supply of solar power created a stir in the solar market last week when the tariff rate was fixed at Rs 4.98-4.99 per unit for a capacity of 630 megawatts (MW).
The power generated under this project is to be supplied by BSES Rajdhani Power and BSES Yamuna Power – 625 MW – and Gift City in Gandhinagar – 5 MW.
The power was awarded to Vena Energy, Hero Future Energies, Hexa Climate, JSW Energy and Serentica Renewables. JSW Energy got 230 MW at a rate of Rs 4.98 per unit, followed by the remaining four companies with 100 MW each.
What makes it stand out?
According to Sehul Bhatt, Research Director, CRISIL Market Intelligence and Analytics, the discovered duty rate of Rs 4.98 per unit under SECI’s FDRE Tranche IV is the lowest for such SECI projects.
However, the prices of SECl-linked projects were not comparable with the prices of other FDRE projects allotted by SJVN, NHPC and NTPC, which had the lowest tariffs of Rs 4.38 per unit, Rs 4.55 per unit and Rs 4.69 per unit, respectively, he added.
“This is because these tenders focus on guaranteeing availability of peak power for four hours, whereas SECl projects focus on demand fulfilment ratio (DFR) of 80 to 90 per cent per month,” he said.
He added that the tariff rates in the second allocation of FDRE Tranche IV SECI have come down by Rs 0.60 per unit to Rs 4.98 per unit from Rs 5.60 per unit due to reduction in DFR to 80 per cent from 90 per cent recorded in the first allocation – 1,500 MW Tranche II.
“It was a challenge for developers to achieve 90 per cent DFR at tariffs below Rs 5 per unit. Moreover, peak hour prices of green energy at the Green Day Ahead Market were also crossing Rs 5 per unit. So, the fall in DFR also resulted in an increase in participation to 50 per cent in Tranche-IV from 32 per cent in Tranche-II,” he added.
According to a senior official, the tender result is historic as it is the first of its kind to achieve a customs duty rate of less than Rs 5 per unit.
“80 percent demand-side response is… Enough to replace new thermal power plants. Completely green energy with a mix of solar, wind and batteries. Thermal energy has two tariff components – fixed and variable. Here, the tariff is fixed for 25 years,” an official told on condition of anonymity.
The official said the tender is expected to be different from others because it will follow the demand curve set by the buyer. While other tenders do not supply according to the demand curve.
“The buyer will get green energy after 24 months for 25 years at a fixed rate… SECI has four more tenders planned,” the official added.
When it comes to FDRE bids in the utility PPA market, the demand profile of the buying entity is crucial in determining the tariff, given that most of the FDRE bid profiles submitted so far by SECI, NTPC and others are almost the same, said Amit Kumar, Partner and Climate and Energy Ecosystem Leader at Grant Thornton Bharat.
He said the recent unveiling of Rs 4.89 per kWh had the same boundary conditions as SECI’s FDRE Tranche II offer, however, the tariff disclosed in the Tranche II offer was Rs 5.60 per kWh in March 2024, while the Tranche IV tariff is about Rs 0.70 per kWh lower than the Tranche II tariff, which happened within five months.
“This tariff differential is largely due to two factors – the demand profile of offtakers and the changing capex outlook for RE asset classes,”.
He added that the renewable energy capacity mix is the key factor in determining the two comparable offers. On the commercial side, the price of BESS has come down significantly in the last four months, which was also a key factor in reaching Rs 4.89 per kWh in the latest offer.
Debmalya Sen, head of advanced energy solutions for India at the World Economic Forum (WEF), said the tender is the closest India has come so far to achieving 100 per cent renewable, round-the-clock electricity, where developers meet their 24-hour power needs using only renewable sources.
“The tariff discovery is encouraging as it is equal to, and in many cases higher than, the prevailing tariffs of many other sources of generation, including coal,” he told .
According to Sabyasachi Majumdar, senior director, CARE Ratings, the rate disclosed under the current SECI tender is not the lowest rate disclosed under FDRE.
“The different FDRE tenders are not directly comparable,” he said.
Majumdar added that this tender is historic and different in the sense that the proposed power supply scheme closely reflects the actual power consumption patterns of distribution operators – it is demand-led in nature.
What does it involve?
In June last year, the Ministry of Energy had come out with guidelines for FDRE, which included two types of tenders – first, guaranteed peak time capacity, where developers had to meet a peak time capacity requirement of 90 per cent for four hours a day.
The second model is the load-following model, where the developer is given an hourly load profile and is expected to consume the same 80-90 percent of the time each month.
The current tender is based on the FDRE load model, where the criteria for compliance are more stringent as the developer has to meet the load requirement throughout the day, which entails a higher price tag, the World Economic Forum senator said.
“Since June 2023 till date, 11 FDRE tenders have been floated by various nodal agencies including SECI, NTPC, NHPC and SJVN in relation to 13.2 GW of renewable capacity. All of them, except SECI, are based on guaranteed peak availability model, with the price ranging from Rs 4.38 per unit to Rs 4.72 per unit,” he said.
Sen added that in the case of cargo after SECI tenders, the price is higher.
“Out of 11 announced tenders, two were canceled, PSA signed one, and the tender for the remaining three was decided. A total of 4.3 GW of capacity is currently under open tenders,” he said.
Far ahead
According to Kumar of Grant Thornton Bharat, while BESS is currently priced competitively, this could change towards the end of the current fiscal year or early next year if domestic battery demand in China picks up. The current surplus scenario is a result of increased inventory due to tariff and non-tariff measures introduced by Western markets.
“Furthermore, a probable and temporary shortage of supply of high-power solar modules in the Indian market may result in an increase in the solar tariff, which coupled with a correction in battery prices may result in a further increase in the FDRE tariff in the near future,” he said.
He added that through fiscal and non-fiscal interventions, India has the potential to maintain and further reduce the FDRE tariff in a more competitive manner.
So far, peak-capacity tenders have been more effective, but with the reduction in storage costs becoming a necessary catalyst for such tenders, it is expected that the load-following model will also gain more popularity, in addition to the peak-capacity model, the World Economic Forum senator added.
