The centre will cease the electronic reverse auction (e-reverse bidding) for renewable energy projects. The renewable energy industry urged the government to do away with the e-reverse auction, saying it led to intense competition and a steep fall in tariffs, which would make some projects unviable.
What is e-reverse auction/bidding?
- The e-reverse auction platform was introduced to promote competition to get the best price, as it allowed the bidders to see all the bids in real time. It offered them the option to revise bids, unlike the closed ones where only one bid is submitted.
- A reverse bidding is a type of auction in which sellers bid for the prices at which they are willing to sell their goods and services.
- In a regular auction (bidding), a seller puts up an item and buyers place bids until the close of the auction, at which time the item goes to the highest bidder.
- In a reverse bidding, the buyer puts up a request for a required good or service. Sellers then place bids for the amount they are willing to be paid for the good or service, and at the end of the auction/biddding the seller with the lowest amount wins.
- In the renewable energy sector, the mechanism of e-reverse auctions has been used largely to discover the lowest tariff, resulting in historically low bids.
- The commissioning and deployments of projects got adversely affected in many cases, and developers faced ‘the winner’s curse’ as import prices of components soared, and in some cases, bids had to be revised upwards.
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