Government weighs cancelling reverse auction for renewable power offers

The Central government is contemplating ending the reverse auction method of project bidding for wind and solar energy projects, reported Livemint. According to Raj Kumar Singh, the union minister for new and renewable energy, the wind energy industry has asked the government to return to closed bidding since reverse auctions hurt businesses because of the low prices revealed through the process.

In the reverse auction procedure, once the bids are opened and the lowest price is determined, there is a further auction for even lower bids. The mechanism of reverse auctions has been heavily utilised in the renewable energy sector to determine the lowest tariff. The planned change in bidding procedures comes on the back of the government’s target to achieve 500 GW (gigawatt) of renewable energy by 2030.

The new and renewable energy minister stated that even though reverse bids lead to lower prices, the need of the hour is to enhance installed capacities. He further stated that the auction process should not affect the capacity building process of the renewable energy sector. According to the data from the ministry of power, India has installed wind and solar capacities of 41.205 GW and 59.303 GW, respectively. As of September 29, the total installed renewable energy capacity was around 163 GW.

Although there are eight windy states in India, the renewable industry believes that since the tariffs determined through open bids and reverse auctions are low, most businesses are moving to Gujarat, the windiest state, according to the minister.

He added that the administration is currently considering pooling the tariffs for wind energy across states. He said, “The speed of wind will be different in Madhya Pradesh, Andhra Pradesh, Karnataka, Gujarat, so the rates of electricity will also be different. They will depend on the wind speed. So, how does SECI (Solar Energy Corporation of India) sell it to the discoms (distribution companies)? So, we have decided to come out with a rule for pooling, bundling. All tariffs will be bundled together and then offered. It will be a rolling sort of thing. It will be for every five years. If we start this today, we will continue for five years. So, all the bids which will be done by SECI; it will be a rolling sort of an average.”

Under the pooling system, for example, a tender of 3,600 MW (megawatt), would include six bids of 600 MW each from six separate states. The union minister of new and renewable energy, who also holds the power portfolio, informed that the sort of bidding process—closed, open, or reverse auction—is under discussion. He claimed that the wind energy sector prefers the closed-bid process and does not want reverse auctions.