Portugal Braces to Break 1 Rupee Tariff Barrier In Bids

Portugal, which held the title of the world’s lowest Tariffs at Rs 1.22 ($16.54/Mwh) approximately after the first round of its solar auctions last year, is set to break the 1 rupee barrier in the second round of auctions, results for which are to be announced today.

The earlier record had been eclipsed by Qatar’s 800 MW auction this year, when the lowest rate from a  consortium of French energy major Total and Japanese conglomerate Marubeni, at a rupee rate equivalent to Rs 1.16  ( $0.1567/Kwh). Of course, since then, Abu Dhabi also saw a record low auction price of $0.0135/kWh (Rs 1 /Kwh) submitted by French energy group EDF and China’s JinkoPower in a 2 GW tender last month.

The current auction round in Portugal, for 700 MW, attracted 35 bids for the ten lots, with the final auction set to take place on August 24 and 25. This round was postponed twice due to the various reasons, including the Covid pandemic after March. It finally started in June this year.

News stories have already surfaced, claiming that the lowest bids received on August 24 have broken the previous record for large scale solar, at $0.0132 (98 paise).

The Portugal auctions are part of plans to push for a PV expansion in installed capacity from 572MW (2018) up to 1.6GW (2021) and 8.1GW-9.9GW  by 2030. The first round had a ceiling price of $50/MWh or Rs 3.70 at present exchange rates. The price cap for this round was $46.13/MWh, or Rs 3.42/Kwh.

These auctions come with an interesting 15 year PPA structure, at the end of which developers can sell the power produced at merchant rates for the remaining 15 year life of the project. It is this second half of the project where calculations have been based, on getting an ‘in’ to the grid at these low prices, to presumably recoup profits in the second half of the project life cycles. That is one reason many analysts have called some of these bids ‘speculative’, although the government of Portugal is hardly complaining, as long as the projects come up. The main issue, as many developers in India will wistfully agree, is that there is a degree of certainty to government policy, capacity commitments and overall stability, once a bid is won. That gives long term planning of the sort done in these bids, a solid base to work on.  Keep watching this space to  get a final update on whether the 1 rupee barrier was finally broken today !