India May Abandon Solar Bidding Method If Offers Aren’t Viable

India may abandon the reverse- bidding process used in its first auction of solar permits after criticism that the procedure led to offers that aren’t viable from inexperienced companies.

The country plans to award licenses to build another 3,000- megawatts of solar power plants and may call for bids as early as this year, Deepak Gupta, secretary of the Ministry of New and Renewable Energy, said in New Delhi.

“Bidding is likely to happen, but should there be alternatives that is something to consider,” he said. “We’ll have a better idea,” of what method to use after a second round of bidding for 350 megawatts is carried out over the next few months, he said.

In India’s first auction last December, companies offering to sell electricity from their plants at the cheapest rates won in a process known as reverse-bidding. The winners, some who offered discounts of more than 30 percent, committed to building plants at unviable rates because they don’t understand the costs of new technology, according to Tata BP Solar Ltd., a solar panel maker jointly owned by the oil company and one of India’s largest non-state power producers.

‘Flipping’ Licenses

The government may consider tightening rules on developers to prevent them from selling stakes in projects too quickly, Gupta said. To prevent winners from “flipping” licenses, guidelines say developers can’t change their shareholding in a project after bidding until the project is built unless they’re a public company.

“There might be more stiffening of this lock-in time,” Gupta said. “People who bid must implement. We don’t want to encourage,” switching of ownership, he said.

The rules also require projects to use locally made equipment unless they’re using thin-film panels. As of now, there are no plans to extend local content rules to thin-film, Gupta said.

By 2022, India plans to build 20,000 megawatts of solar capacity, about the euqivalent of 18 nuclear plants, making it one of Asia’s top three producers along with China and Japan. The first 1,000 megawatts is slated to be built by 2013, followed by another 3,000 megawatts by 2017.

To contact the reporter on this story: Natalie Obiko Pearson in Mumbai at npearson7@bloomberg.net.

To contact the editor responsible for this story: Reed Landberg at landberg@bloomberg.net.

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