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Tamil Nadu cancels 500 MW solar projects due to high tariff

Tamil Nadu has cancelled the auction held for 500 MW solar projects in January-February this year. High winning bid of Rs 4.40 per KwH was the main reason for it, said a report in the Economic Times.

The cancellation was communicated to the developer, who had won the contract, via a letter dated September 12. The developer was asked to take back the bank guarantee it had submitted.

"You are requested to collect the bank guarantee from this office on any working day," the letter, written by the chief engineer non-conventional energy sources at the Tamil Nadu Generation and Distribution co (TANGEDCO), said.

No official announcement has been made by the TANGEDCO yet.

The auction had raised tepid response with bids coming in from 20 developers for only 292 MW. The tariffs ranged between Rs 4.40 and Rs 4.50.

Of the bidders, lowest was received from Rays Power Infra for 100 MW at Rs 4.40 per KwH.

According to the report, Tamil Nadu distribution company had said that the bids will need to match the lowest bid.

Of the 20 bids, one was rejected due to non-agreement to meet the lowest bid and three were rejected by the board on technical reasons. The 16 developers left were to set up solar projects in the state at price of Rs 4.40 KwH.

However, this did not work as solar tariffs between February and June at other auctions dropped on back of lower solar equipment cost.

TANGEDCO conducted another auction in July for 1500 MW, which received lowest bid of Rs 3.47 KwH. The board has been trying to reduce the tariffs since then.

However, the developers resist saying that drop in prices will make their projects unviable.

The lowest solar tariff was of Rs 2.44 per KwH by Solar Corporation of India at the Bhadla Solar park in Rajasthan.