Reverse Bidding Comes Back as Wind Tariffs Rise in Auctions: Report
Moneylife Digital Team 04 March 2024
The Union ministry of new and renewable energy (MNRE) has brought back the old method of 'reverse auctions' for auctioning wind power capacity to energy companies. The ministry's move to bring back reverse bidding has disappointed the wind industry, which feels that too much emphasis only on keeping tariffs low is hampering capacity additions, says a report.
 
According to the report from The Hindu Business Line, MNRE sent a letter to agencies that implement the capacity auction process such as state-owned Solar Energy Corporation of India (SECI), NTPC Ltd, NHPC Ltd and SJVN Ltd, stating that "in view of under subscription and higher tariff discovery in recent wind bids", it had reviewed the bidding method. "Reverse auction shall also be conducted," the letter says. 
 
Under the 'reverse auction' method, bidders continue to bid against each other after the initial bids are opened, until a bid tariff goes unchallenged by a counterbid.
 
"Incidentally, the ministry had given up the 'reverse auction' method at the beginning of this financial year only because the method was not delivering results in terms of wind capacity installations. Data from the Central Electricity Authority (CEA) shows in the six years between March 2017 (when wind capacity auctions began) and March 2023, India added just 10,354 MW or a mere 1,725 MW per year," the report says.
 
The method did bring down tariffs, from Rs3.46 a kWhr in the first tariff to a record low of Rs2.44, before rising to about Rs2.80 -- but unremunerative tariffs resulted in poor capacity installations, the newspaper says, adding, "Energy companies (developers) also surrendered about 4,000 MW of capacity, saying they were unable to execute the projects." 
 
After the reverse auction was given up and the 'closed bidding' system was adopted (where the bids are opened and the lowest bidder is declared the winner), tariffs rose, it added.
 
According to BusinesLine, the ministry's move to bring back reverse bidding has disappointed the wind industry, which feels that too much emphasis only on keeping tariffs low is hampering capacity additions. 
 
"They point out that a tariff of around Rs4 is still lower than the average cost of power that the state utilities incur when they buy electricity from diverse sources such as thermal, nuclear and hydel," the report says.
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