(Bloomberg) -- India is exploring changing the way it awards renewable power projects as it seeks to address criticism the world’s cheapest solar and wind rates are undermining domestic developers.
Indian companies have said electronic reverse auctions, in which participants compete to provide electricity at the lowest rates, has spurred “predatory bidding” that undercuts their business, said Anand Kumar, secretary at the Ministry of New and Renewable Energy. The ministry has hired the Indian Institute of Management, Lucknow to examine the issue, he said.
“There has been constant demand from the local solar and wind industry to discontinue the e-reverse auction because it can hurt the Indian industry,” Kumar said.
The nation’s bidding process has resulted in some of the cheapest rates for solar and wind power in the world, forcing some coal-fired developers to rethink the competitiveness of their projects and spurring optimism that Prime Minister Narendra Modi can boost the nation’s use of clean energy.
The ministry will await the report, expected to be submitted next month, before deciding if a change is needed, Kumar said. Officials at Indian Institute of Management, Lucknow weren’t immediately available for comment.
Record Low Rates
Prices quoted for supplying wind and solar energy in reverse auction during 2017 were as much as 45 percent lower than the previous year, according to Bloomberg New Energy Finance. SBG Cleantech Ltd. -- a joint venture between Japan’s SoftBank Group Corp., India’s Bharti Enterprises Pvt. and Taiwan’s Foxconn Technology Co. -- and French utility Engie SA-backed Betam Wind Energy Pvt. were among firms last year that quoted record low prices for solar and wind projects, respectively. None of the projects awarded at record-low rates have been commissioned yet.
The Indian Wind Turbine Manufacturer’s Association has sought either a return to fixed tariffs or a single-bid system. Aggressive bids push investors to seek lower prices from turbine manufacturers who in turn ask component makers to reduce their prices, according to Tulsi Tanti, the chairman of the industry group and turbine maker Suzlon Energy Ltd.
“If this continues, the 4,000 vendors and 2 million associated jobs will disappear,” he said.
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