Indian utility Gujarat Urja Vikas Nigam Limited (GUVNL) has auctioned 500MW of PV capacity, with winning bids setting a record for the lowest solar tariff seen in India.

Four companies quoted the lowest INR1.99/kWh (US$0.0269/kWh) amount in the auction for solar projects to be developed in the state of Gujarat, marginally beating the previous record of INR2/kWh that was set for a solar auction in Rajasthan last month.

NTPC, India’s largest power company, secured 200MW of solar capacity through the auction, as it progresses with efforts to add more than 5GW of solar in the next two years and reach 30GW of renewables output by 2030.

Aditya Birla Renewables, Torrent Power and Saudi Arabia’s Aljomaih Energy and Water Company won 120MW, 100MW and 80MW of capacity, respectively. When the projects begin commercial operations, the four companies will enter into 25-year power purchase agreements with GUVNL.

Winning bids

Aljomaih Energy was one of two companies that posted winning bids in last month’s record auction, in which the lowest prices were down 15% on the previous lowest bid for solar power in India from another auction held by Solar Energy Corporation of India in June. While bids in India continue falling, they remain higher than the world record-low prices achieved in Portugal's auction earlier in the year.

According to JMK Research & Analytics, reasons for the new record tariffs in India include the interest of new entrants in the market, the availability of low-cost funding and an expectation that module prices will fall. “No applicability of SGD (safeguard duty) and BCD (basic customs duty) on modules for this specific tender is also one of the reasons for lower tariffs,” Jyoti Gulia, founder and director of the consultancy, said in a statement sent to PV Tech.

Gulia also warned that project quality “might also be compromised” with such low tariffs. “Time alone will tell whether this tariff is viable or not, but clearly recent tender activity has demonstrated investor confidence in the Indian solar sector even amidst the pandemic and sets yet another tough benchmark for the whole industry.”

India’s auctions are helping the country ramp up renewables capacity to meet ambitious deployment targets, with Prime Minister Narendra Modi recently announcing that clean energy capacity will rise to 220GW by 2022, higher than the country's 175GW target.