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Solar developers see pain points in Tamil Nadu’s 1,000 MW bidding

According to reports, although the mood over the upcoming 1,000 MW programme of the Tamil Nadu Government is palpably upbeat, many prospective investors have pointed out several pain points in the visible contours of the programme. They want these to be addressed before the tender is out.

The biggest worry still remains payment security. Tangedco has said payments will be backed by letters of credit. Still, many questions remain unanswered. LCs for what duration? Will the LCs be enforceable? Will they be irrevocable? Will they cover the first year’s tariff or also the annually hiked tariff too? Absence of specifics at this stage cause concerns among investors.

The other concern is the ‘pro-rata’ allotment of projects. Given the huge interest from developers, it is expected that the bids submitted may exceed the 1,000 MW offered. If it happens, Tangedco says the projects will be awarded on ‘pro-rata’ basis.

This, developers say, is not doable. Rationing out capacity means the awarded project will be smaller than what was bid for. Therefore, some may opt out of the race. So it becomes a catch-22 situation, for, how would Tangedco know what capacity to ration out?

Another major issue is that of the mechanism of award of projects — the L-1 matching — where the bidder who asks for the least tariff gets the project of the size he wants and the others are asked to match that bidder’s tariff.

This won’t work, say developers, because the offered price is for a project of a specific size. For example, if the best bidder has a project of, say 100 MW, whereas the next best bidder has bid for 25 MW. There is no way the second bidder will be able to match the best bidder’s price.

Investors are also concerned over the tight deadlines given for tying up funding for the project — 90 days after the letter of intent is issued — which they say is unreasonable.

And, what if the load flow study shows that there is not enough evacuation capacity available to taking out the power? Is the bidder out of the race?

Therefore, wouldn’t it be better if Tangedco were to ascertain the spare capacity of the sub-station and lines at several chosen locations and then ask the bidders to bid for projects there?

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