The viability of PV projects coming out of the three latest state solar auctions in India is “quite low”, according to an initial examination from consultancy firm Bridge to India, but industry opinions differ over the quality of project returns.

The company is currently collecting data to analyse the winning projects from recent auctions in Madhya Pradesh, Telangana and Punjab, which all received aggressively low winning bids of less than INR6 (US$0.092) per kWh.

Gayrajan Kohli, senior manager, consulting, Bridge to India, told PV Tech that discussions with an unnamed leading project developer have revealed that it may consider dropping one of the projects it won through an “overly aggressive strategy”.

It is considering this action because the hit from losing the bid bond will not be as heavy as the one incurred by signing and fulfilling a power purchase agreement (PPA) for the project. No further details were disclosed.

Kohli said: “We do not anticipate the same to happen across the industry, and definitely not with the bids won by SkyPower, but this consideration by a bid winner is quite telling.”

He added that the main concern is actually domestic project developers, who have cornered the majority of the market at present.

Bridge to India’s preliminary results found that project viability from the three auctions is “quite low, bordering on being nonviable”. However, this is not the case if a project is delayed, for example if the tendering authority is not ready, or there are delays in bid bond submission, PPA signing, land procurement, or if the project has a very long commissioning timeline of more than 16 months. Delays and long timelines help developers reduce their project costs and become more viable, for example through better negotiations with EPC companies, easier procurement of land, and lower labour rates, said Kohli.

Kohli added that early findings suggest returns for projects will be around 12% for bids around INR5, which he claimed is very low and developers should be aiming for a minimum of 15% return.

However, Vikas Dawra, managing director, Sustainable Investment Banking, Yes Bank, India, told PV Tech that this level of return is “not low” and is actually a “very viable option”.

Dawra added that, since the three latest auctions, Indian interest rates have come down. He also pointed out that developers winning in the Madhya Pradesh auction have three years to execute their projects.

He explained that this extended period brings benefits to the developer including an expectation for capital to become cheaper, with more capital entering the Indian sector, along with a reduction in module costs.

Dawra even said he expects future auctions to be even lower than some of the latest winning tariffs.

Last month, PV Tech interviewed Bridge to India founder and managing director Tobias Engelmeier on the issue of low winning tariffs.