Renewable Energy (RE) has come a long way in India and one can safely say that it is well on its way to becoming mainstreamed with over 25 GW of installed capacity (12% of total) as of date. While the past decade witnessed a CAGR of ~22%, the absolute target for the 12th Plan at 30 GW (nearly 42% more than the entire conventional capacity addition of 21 GW in the 10th Plan (2002-07)) is ambitious indeed. Capacity addition will have to grow even further to meet the guiding NAPCC target of 15% RE by 2020. As one of the core capacity addition resources in the years to come, the impacts of the RE sector on the retail consumer tariff, utility finances and the physical grid can no longer be ignored and hence it is appropriate to introduce further competition in the RE sector.

There are several reasons to move towards procurement of RE power through Competitive Bidding (CB), namely (1) that it is mandated by the EA 2003 and several policies (NEP,NTP, NAPCC), (2) the limitations of the FiT mechanism, specifically the absence of any digression rates dis-incentivizing cost reductions, possibilities of wind fall gains and the inherent difficulty in determining appropriate FiTs. The experience of CB in the solar procurements under JNNSM and some State Govts has been largely positive resulting in discovered prices being substantially lower than FiTs. Additionally there is rich experience in competitive bidding worldwide with regard to RE procurements which can provide important learnings for India in providing a balanced and appropriate framework for CB to enable fast growth and cost reduction simultaneously.

Competitive Bidding, if designed and implemented well, can be an effective way to procure the required renewable power at the least cost, an issue which is gravely important for India, given the financial health of our public utilities which puts added onus on policy makers and regulators to facilitate cost reduction. Given the success of CB in the solar sector in India, the dynamic nature of the RE sector (rapid technological and cost developments) it would be appropriate to go in for reverse bidding with the state regulated FiT acting as the ceiling tariff. MNRE has already issued drafts for discussion with regard to CB.

To further the discourse on this important issue, Prayas Energy Group organized a half-day roundtable discussion to understand the challenges and way forward on operationalizing competitive bidding for large scale renewable energy procurement. The presentations made during the roundtable and a summary report can be downloaded below.