Indian utility NTPC to invite bids for dollar-based solar contracts

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  Indian State utility NTPC, will award tenders for between 500MW-1GW this month under dollar-based bidding. Flickr: Miran Rijavec

The Indian government is set to invite bids for dollar-based solar power contracts in order to encourage foreign investment in its ambitious solar programme, according to reports.

State-utility National Thermal Power Corporation (NTPC), will award tenders for between 500MW-1GW this month, Ministry of New and renewable Energy joint secretary Tarun Kapoor toldBloomberg in New Delhi.

The contracts will pay the rupee equivalent of the dollar tariff determined by the bidding. Meanwhile NTPC will also create a fund to manage the currency risk it takes on.

Kapoor told reporters that the dollar-linked tariffs could reduce developers' borrowing costs by around a third by dropping solar tariffs down by a similar fraction.

Jasmeet Khurana, senior consulting manager at analyst firm, Bridge to India, told PV Tech that tariff-based bidding is in the pipeline, which will be followed by viability gap funding. NTPC has to allocate 3,000MW of solar projects via this tariff-based bidding, of which around 1,420MW has already been allocated.

For the next 1,580MW, Khurana said dollar-based bidding is likely to make up part of that amount. He was not able to confirm a timeline for this bidding process.

He added such bidding “makes a lot of sense” from an international developer’s perspective, because another entity is able to take the currency risk away from the developer on top of the lower original costs of hedging when a public company or the government is involved.

Power minister Piyush Goyal had proposed the dollar tariff in a recent speech claiming it could encourage foreign investment and help “keep the cost of solar power very reasonable”.

India’s cabinet recently approved the country’s 100GW solar capacity target by 2022, as well as approving plans for the Solar Power Corporation of India (SECI), the main driver for the State’s National Solar Mission, to become a commercial entity and take on projects for other renewable energy technologies under the name Renewable Energy Corporation of India (RECI).

Khurana said that until now SECI has been facilitating project allocation, but needs to become a commercial entity and full solar developer so that the organisation does not “fade away” as the market matures. Responsibility for the national solar mission will is now split between SECI and NTPC.

Khurana said the transformation of SECI to its new role as RECI should not have an effect on the solar market.

Last week, Japanese telecoms provider-turned solar developer Softbank announced the first major foreign investment of US$20 billion in renewable energy in India, which would include all aspects of solar energy development, marking a significant “game changer” for India’s solar goals.