Fixed Tariffs, Removal Of Reverse Bidding Will Help Revive Renewable Sector, Says Avaada Chairman

Feed-in tariffs set by state regulators, and removal of an auction process aimed at finding the lowest possible tariffs would boost green energy investments, according to Vineet Mittal of Avaada Group.

“Reverse auction is not the right methodology for renewables space,” Mittal told BQ Prime. “It has helped us so far to discover the best price. However, in the last two years, the ratio of projects commissioned to total awards has diminished considerably.”

In July, the Ministry of New and Renewable Energy decided to drop e-reverse auction—only for wind projects—after increase in commodity prices made aggressively bid projects unviable. Reverse auctions, where suppliers discount prices to win the bid, can artificially lower tariffs and cause unhealthy competition. The government now plans to invite closed bids for projects.

Given that project costs have risen over 30% since 2020 and interest rates have also strengthened, the government should consider removal of reverse auctions for solar and transmission sectors as well, Mittal said.

According to him, India should consider a single-stage bidding programme and it should be "a level-playing field", he said.

In the last two years, many first-time entrants or companies from India and abroad failed to deliver on projects they won through aggressive bids. Rising commodity prices made these projects unviable, leading to encashment of their bank guarantees.

“The companies got blacklisted, but in the process they sabotaged the whole sector,” Mittal said.

The discovery of low tariffs had become a benchmark for the whole country when the tariffs had to be location-specific, he said. That, according to Mittal, cannot be a benchmark when solar radiation and wind speeds differ state by state, along with capex and opex requirements. So, low tariffs in one state cannot be replicated in another.

According to him, part of the delay in energy projects could be related to the Great Indian Bustard issue—where projects planned around the endangered bird's habitat are awaiting a Supreme Court ruling—though not every project was planned in the GIB area.

As per the latest MNRE data, around 8,100-megawatt projects awarded under manufacturing-linked schemes are pending.

Policies should keep pace with the evolving signs of huge growth potential of this sector across the world and in India, Mittal said.

According to Mittal, if India needs to succeed in achieving energy transition targets and 'atmanirbharta' (self-reliance), it will have to go back to a feed-in tariffs decided by state electricity regulators. India had moved away from such fixed tariffs to auctions about five years.

The country has an established model based on past experience and the required infrastructure, he said.

“People only desire fair returns. If people don’t make fair returns, obviously the number of players in the market will reduce," he said. "The good news is that players like Adani and Ambani have ambitious plans and that could be a game-changer for the industry."

The Avaada Group aims to be a 30 GW company by 2030. Currently, it has 11 GW of power purchase agreements and will have 4 GW of operating assets by December 2022, he said.

Over the last 14-15 months, the Avaada Group claims to possibly be the only company to have commissioned 2 GW capacity in Asia, except China, despite Covid-19 and other challenges.

“We recently commissioned the world's largest single location solar plant of 1.25 GW in Bikaner. We will announce 3 GW plant by the year-end,” he said.

The company is also targeting 3 GW of solar cells-to-module manufacturing capacity by 2023. This will be taken to 5 GW by 2025, he said.

The Avaada Group has also entered into an agreement with the Rajasthan government to set up a 1 million tonne per annum green ammonia plant in Kota.

“We plan to award the contract for the project by next year in March. The project will be commissioned in phases by 2026,” Mittal said.

Mittal expects India to be a major exporter of green molecules. There will be multiple players in India who will start making such molecules, he said.

There was a misconception that sectors like fertilisers, steel, chemicals, and transportation cannot go the green way, he said.

“Now, there are hydrogen trucks which are more efficient than battery trucks. For 1,000 km, it takes 7.5 minutes to fill a hydrogen truck versus a diesel truck that takes 4.5 minutes versus if you use battery–it will take 4-5 hours. On top of that, battery has 40% dead-weight."

According to him, we will soon see "hydrogen car, dumper, trucks queuing up at the fuel retail outlets".

“In the next 10 years, the bigger transition will be that at petrol pumps, we will be able to supply H2 (hydrogen). We will see that in India. Government is working continuously to make this a zero-accident industry."