MNRE has prescribed an annual bidding trajectory of 50 GW renewable capacity until FY 2028. It has further mandated that at least 10 GW per annum of this capacity should be reserved for wind projects. For the current financial year, the government wants tender issuance of at least 15 GW capacity each in the first two quarters and 10 GW each in the subsequent two quarters. These targets shall be split amongst various government agencies like SECI, NTPC, NHPC, SJVN and state PSUs.
The new bidding trajectory comes mainly as the government is keen to accelerate progress towards meeting the 500 GW renewable capacity target for March 2030. Annual capacity addition remains stuck in the 12-15 GW region as against a target of over 45 GW. Outlook for the next two years appears flat. The industry has also been pressing the government for a visible tender trajectory to enable more efficient planning and supply chain management.
This is the second time the government has issued a bidding trajectory – the first one, announced in 2018, had a target of 80 GW new tenders in three years. However, the result of the government trying to push new tenders was far from encouraging. Many tenders were undersubscribed and/ or cancelled owing to poor design, low ceiling tariffs, unrealistic commissioning deadlines, and/ or challenges in obtaining land and transmission connectivity. Even when auctions were successfully completed, DISCOMs refused to come forward to contract purchases or project construction got stuck because of high execution risks, policy uncertainty and low margins.
As the following figure shows, gap between tender issuance, auction and project commissioning has become progressively bigger over time.
Figure: Progress on renewable tenders, MW
Source: BRIDGE TO INDIA research
Notes: Capacity numbers are shown on a cumulative basis from 2016 to YTD 2023. Commissioned capacity excludes open access projects.
The intention behind issuing a bidding trajectory is laudable, but issuing more tenders without fixing underlying problems will only add to uncertainty in the sector. Instead, the government needs to focus on creating demand by using a carrot and stick approach with DISCOMs and other bulk consumers. Investments in new thermal projects, sending a confusing signal to all stakeholders, need to be avoided. Second, various supply side constraints like land, transmission, equipment and financing need to be addressed by creating a stable policy framework. Finally, the competitive bidding process needs to be tightened to ensure that all sides stick to their commitments.
The post Sense of déjà vu as MNRE issues new bidding trajectory appeared first on BRIDGE TO INDIA.