5 Common Errors Energy Companies Make in Tender Bidding (and Proven Strategies to Win)

Introduction

India’s renewable energy ambitions have fueled a fierce competition in energy tenders. The government is targeting 500 GW of non-fossil fuel power capacity by 2030, driving a steady stream of large-scale solar, wind, and hybrid auctions. As of early 2025, over 65 GW of renewable projects have already been tendered out. These bidding opportunities are immense, but so are the pitfalls. Energy companies often rush in to secure projects, only to stumble on avoidable mistakes that can cost them the bid - or worse, lead to project failures and financial losses. In this article, we highlight five common errors energy companies make when bidding in Indian energy tenders, and discuss proven strategies to win bids sustainably. The insights and case studies - from Azure Power’s bank guarantee forfeiture to the global copper price surge - underscore how critical it is for bidders to balance competitiveness with due diligence. By learning from these mistakes, energy sector professionals can improve their tendering approach and ensure that winning bids translate into successful projects on the ground.

Mistake 1: Neglecting Tender Compliance and Requirements

One of the most fundamental errors is failing to read the fine print. Indian energy tenders, whether floated by Solar Energy Corporation of India (SECI), state agencies, or public sector companies, come with detailed Request for Proposal (RFP) documents and strict eligibility criteria. Yet, bidders sometimes overlook technical specifications, documentation formats, or submission procedures - mistakes that can instantly disqualify a bid. For example, something as simple as missing a required form or not following the prescribed format can lead to rejection, regardless of how attractive the price or project plan is. As tendering experts note, “Failing to adhere to tender specifications is a common mistake that can instantly disqualify a bid.” Both technical and administrative non-compliance (e.g. incorrect document formatting, missing signatures or certificates) have caused many an bidder to be knocked out in the initial scrutiny. In the Indian context, there have been cases where even large firms ran into trouble for not meeting tender conditions - for instance, allegations that a developer used improper documentation in a bid led to inquiries and reputational damage. Such missteps are avoidable with the right approach.

Proven Strategies to Win (Compliance):

The best strategy here is thoroughness and diligence in bid preparation. Before submission, carefully dissect the tender documents - including all annexures, technical requirements, and contractual terms - to create a compliance checklist. Many successful bidders implement a multi-level review process, where different team members verify that every requirement is met. It’s wise to use the provided templates and forms exactly as instructed (without unwarranted alterations) and to double-check for completeness (e.g. all certifications and affidavits signed). If any RFP clause is unclear, do not hesitate to seek official clarifications during the pre-bid period - Indian tender authorities like SECI and state nodal agencies usually entertain queries and issue clarifications which become binding. Essentially, no detail is too small: from formatting the bid response properly to ensuring bank guarantees and other instruments are in the correct format and amount. By rigorously complying with all specifications, companies put themselves in a position to have their bids evaluated on merit, rather than thrown out on technicalities. This upfront effort is a proven winning strategy - it reflects professionalism and increases your chances of moving forward to the financial evaluation stage.

Mistake 2: Underestimating Cost Volatility and Market Dynamics

Another common pitfall is misjudging the economics of the project - particularly overlooking how market fluctuations can affect costs. Renewable energy bids in India are typically long-term fixed-price contracts (e.g. 25-year power purchase agreements), leaving developers exposed if input costs rise unexpectedly. Many companies assume that costs will continue to fall (as they largely did through the 2010s), and thus they bid aggressively low tariffs. However, global commodity trends in recent years have delivered harsh lessons. A case in point is the surge in commodity prices around 2021-2022: Key materials for power projects - from solar modules to metals like copper and steel - saw dramatic price spikes. Solar module prices, which had been declining for years, increased for the first time in 2021 by around 20% due to surging costs of polysilicon, metals, and freight. Similarly, copper - essential for electrical cables and transformers - hit unprecedented highs. In fact, global copper prices broke records, reaching about $5.20 per pound in May 2024 (over $11,000 per metric ton) amid supply tightness and soaring demand. This kind of volatility wreaked havoc on project budgets. Developers who had locked in rock-bottom tariffs based on overly optimistic cost assumptions suddenly faced equipment prices far above their estimates.

The Indian renewable sector has witnessed the fallout of underestimating such risks. For example, some developers that bid extremely low solar tariffs later struggled to procure equipment and attempted to delay or cancel projects when costs didn’t decline as expected. A notable instance is Acme Solar, which had won projects in 2017 at a then-record low tariff of ₹2.44 per kWh. By 2020, confronted with higher costs and policy changes, Acme petitioned regulators to terminate its power purchase agreements for those projects. Essentially, the economics had turned unviable, illustrating the classic “winner’s curse” of underpriced bids. This scenario played out for multiple firms; analysts noted that as of early 2020, PPAs for about 7,000 MW of auctioned renewable projects were yet to be signed by buyers - many such projects were in limbo as developers and offtakers hesitated on tariffs that suddenly looked unsustainably low. All of this underscores that bidding without factoring in potential cost escalations, supply chain disruptions, or currency fluctuations is a serious error.

Proven Strategies to Win (Cost Management):

To avoid this mistake, companies must adopt robust financial modeling and risk mitigation when crafting bids. Build realistic cost assumptions by considering commodity price cycles, inflation, and potential import duties or taxes. Perform sensitivity analyses - ask how the project IRR holds up if module prices rise 20%, or if interest rates increase, etc. It’s often prudent to secure vendor agreements or price locks for key equipment in advance, or include buffer contingencies in the bid price. Savvy bidders also pay attention to government policy: for instance, the imposition of Basic Customs Duty (BCD) on solar modules in 2022 added ~40% to module costs overnight. Anticipating such policy shifts (or at least not assuming indefinitely cheap imports) is crucial. The Ministry of New and Renewable Energy (MNRE) has offered some relief via ‘Change in Law’ clauses - ruling that new duties and taxes can be treated as change-in-law events in contracts, which can allow tariff adjustments or compensation. Bidders should ensure that such protective clauses are present or negotiate for them when possible. In short, bake in a margin of safety. It’s better to bid a slightly higher tariff that survives real-world cost increases than to bid a record low that becomes impossible to deliver. A sustainable bid not only wins the auction but also leads to a profitable, executable project - which is the ultimate win.

Mistake 3: Overaggressive Bidding with Unrealistic Tariffs

In the quest to win big tenders, many energy companies in India have fallen into the trap of “too low to be true” bidding. The competitive auction system (especially for solar and wind projects) often awards contracts to the lowest tariff (L1) bidder, which can tempt players to bid aggressively, sometimes below their true cost of supply. India has repeatedly made headlines with record-low renewable tariffs - from ₹2.44/kWh in 2017 to ₹2.00 and even ₹1.99/kWh in late 2020. Such tariffs, achieved in auctions by SECI or state utilities, grabbed global attention and were celebrated as milestones for cheap green energy. However, bidding extremely low just to win can be a double-edged sword. If the bid is based on shaky assumptions (continued decline in equipment costs, ultra-cheap financing, perfect execution), any deviation in reality can erode the thin margins or render the project non-viable. The period after 2020 has indeed shown an upward creep in tariffs, as the conditions that enabled those rock-bottom prices changed. According to industry reports, the ₹1.99/kWh solar bid was enabled by factors like historically low interest rates, declining solar panel prices, and assured power purchase agreements at the time. But by 2021-22, module and commodity prices rose sharply and interest rates inched up, so developers could no longer finance projects at ₹1.99 without incurring losses. In other words, today’s lowest bid can become tomorrow’s loss leader if it’s not grounded in fundamentals.

The fallout from overaggressive bidding is evident. Some projects won at ultra-low tariffs have faced delays or cancellation as developers found themselves unable to achieve financial closure. Lenders and investors grew wary of funding projects with scant margins, and some winning bidders walked away despite forfeiting bid bonds or bank guarantees. The Indian renewable sector has seen instances where capacities had to be re-tendered because initial winners backed out. Even the government has become cautious: at times, tenders have been canceled or capacity partially reallocated when quoted tariffs were deemed “unrealistically low” or when winners could not sign PPAs in time. Overaggressive bids can also strain the entire value chain - EPC contractors, equipment suppliers, and O&M providers get squeezed as the developer tries to cut costs to make the project viable. In short, while winning at the lowest price is the goal in auctions, a bid that is out of touch with economic reality is a recipe for trouble.

Proven Strategies to Win (Bid Discipline):

Experienced players emphasize strategic discipline in bidding. Rather than chasing the absolute lowest tariff, focus on optimized pricing - the goal is a competitive yet sustainable bid. Conduct thorough due diligence on project site conditions (expected generation, CUF) and realistic cost of capital. Identify your unique advantages - for example, companies with captive module manufacturing, or access to low-cost financing (perhaps via green bonds or multilateral funding), or superior technology might genuinely afford to bid lower than others without jeopardizing viability. If you don’t have such advantages, it’s wise to know your limits and possibly bid slightly higher but within a range that still has a chance if others overreach. Also, consider the tender rules: sometimes non-price factors (like execution capability or past experience) are considered - in such cases, emphasize strengths in those areas rather than simply undercutting on price. When the auction is purely price-based, a proven strategy is to decide on a walk-away price before the bidding and stick to it, based on your financial model’s lowest acceptable return on investment. Sticking to disciplined bidding criteria protects your company from the “winner’s curse”. As industry analysts have pointed out, overly exuberant low bids have raised concerns about asset sustainability and even spooked investors. In contrast, bids that are competitive but well-grounded can win the auction and secure financing thereafter. Remember, the true victory is not just winning the tender, but building a profitable project. Bidding to win at any cost is a mistake - bidding to win sustainably is the strategy that pays off in the long run.

Mistake 4: Ignoring Off-taker Risks and PPA Uncertainties

Securing a tender is only half the battle; the next crucial step is signing a Power Purchase Agreement (PPA) or Power Sale Agreement (PSA) to actually sell the electricity. A common error energy companies make is treating the offtake arrangement as an afterthought - assuming that since they won the bid, the rest is a formality. In reality, India’s tender ecosystem has a complex structure: for central auctions by SECI, the agency signs PPAs with developers and back-to-back PSAs with state distribution companies (discoms) who will buy the power. If the discoms are slow to come on board or refuse to honor the tariff, projects can stall despite the tender being awarded. Off-taker risk - the risk of not having a willing/able buyer for the power - is very real. We have seen this play out painfully in several cases. A notable example is Sprng Energy’s 100 MW wind project in Madhya Pradesh: Sprng won the bid at ₹2.82/kWh in 2019 and signed a PPA with SECI, but the ultimate buyer (Kerala’s state utility) did not approve the PSA in time. Citing the delay in finding a final buyer (along with pandemic disruptions), Sprng Energy petitioned the regulator to cancel its PPA and release its performance bank guarantees. In effect, the project was in limbo because there was no confirmed entity to buy the power, through no fault of the developer. Similarly, other top developers have faced PPA hurdles - ReNew Power in 2020 sought to cancel a 265 MW wind PPA, and Acme Solar attempted to exit a solar PPA for 600 MW at ₹2.44/unit, all because the downstream arrangements (PSAs with states or viability of the tariff) were uncertain.

Another high-profile case highlighting off-taker risk is Azure Power’s 700 MW of projects in Andhra Pradesh. Azure had won this capacity in a manufacturing-linked solar tender. However, after a change of state government and other complications, the offtake for those projects became contentious - there were allegations of attempts to transfer the projects to another developer, and the situation devolved into legal disputes. Eventually, Azure Power’s failure to get those projects off the ground led SECI to initiate forfeiture of Azure’s bank guarantees for these projects. Part of the issue was that power from those projects did not have a clear home due to the state’s stance. The lesson is that winning a tender without clarity on who will buy the power (and at what terms) can result in stranded projects and financial penalties. The government has recognized this: learning from these episodes, SECI and MNRE now stress securing firm PSAs with discoms before or alongside tenders. In fact, the central government has slowed down some bids until they confirm buyers, to avoid situations where projects are awarded but cannot be signed into force for lack of an offtaker. Ignoring this aspect can leave a developer stuck with an awarded project that is effectively in limbo - a costly mistake in terms of time, money, and lost opportunity.

Proven Strategies to Win (Off-taker Assurance):

The strategy here revolves around due diligence and proactive engagement. Before bidding, developers should evaluate the creditworthiness and appetite of the potential power buyers (state discoms or intermediaries). If it’s a state-specific tender, check the health of that state’s discom and whether the state has honored PPAs in the past. In central auctions, track which states have signed up for the tender capacity - for example, if 1,200 MW is auctioned, SECI usually has allocation to certain states; ensure those states are on board. It can be wise to seek assurances or MoUs with buyers where possible. In some recent schemes (e.g. auctions blended with round-the-clock supply or with storage), the government is involving discoms upfront to sign formal letters of intent. As a bidder, factor in PPA risk into your strategy: you might prefer tenders that come with a tripartite agreement or a payment security mechanism that secures revenue. Additionally, push for timely execution of PPAs - the standard bid documents often stipulate PPA signing within a certain period. After winning, maintain pressure (and communication) with the procuring agency to expedite PSA approvals. If there are undue delays, developers have approached regulators (CERC) to avoid getting penalized for the hold-up. Essentially, treat the PPA as critical as the bid itself. A proven winning approach is to only bid on capacity that you are confident will have a buyer and to structure your consortia or partnerships to include off-takers where possible (for example, captive or group-captive models with commercial consumers, if allowed). The government is increasingly aligning tender designs to ensure off-take - such as requiring letters of comfort from states before launching an auction - so aligning with that trend will position your projects for success. By securing the revenue side of the project (the PPA), you not only win the tender but also ensure the project will reach financial closure and actual operation, which is the ultimate goal.

Mistake 5: Overextending Beyond Execution Capabilities

In the rush to grab market share, some energy companies bid for and win more projects than they can realistically execute, or ventures that are outside their core expertise. Overcommitting - whether in terms of volume, geographic spread, or new technology - is a serious mistake that can lead to delays, cost overruns, and punitive penalties. Bidding is just the start; the real challenge is achieving commissioning on time and on budget. If a company doesn’t have the organizational capacity, financial strength, or on-ground wherewithal (e.g. land acquisition, engineering, and project management resources) to deliver what it wins, the consequences can be dire. Indian tender rules typically mandate bid security and performance bank guarantees as safeguards. When a winner falters, these guarantees can be forfeited, inflicting financial loss and reputational damage. A cautionary tale is that of Azure Power, once a celebrated solar developer, which in recent years faced difficulties on several awarded projects. In early 2025, the government forfeited ₹35 crore worth of Azure’s bank guarantees because the company failed to complete 700 MW of solar projects across multiple states within the stipulated deadlines. This unprecedented action by SECI came after repeated extensions and ultimately reflected that Azure had taken on more than it could handle (amid other internal challenges). The forfeiture not only hurt Azure’s finances but also signaled to the market that the authorities will strictly enforce contractual obligations.

Azure’s case is high-profile, but it’s not the only one. There have been instances of developers who, after winning sizable capacities, struggled to acquire land or secure transmission connectivity for their projects, causing them to miss milestones. Others misjudged the complexities of new tender requirements - for example, ventures into hybrid projects (solar+wind) or energy storage without having prior experience, which led to implementation troubles. Overextension can also be financial: some firms use short-term debt or very high leverage to back their bids, only to face cashflow crises when project timelines slip. The Indian renewable sector saw a phase of aggressive bidding by newer entrants and even non-energy companies drawn by the sector’s growth; a few of those players had to later sell off unfinished projects or exit, as executing at scale is not trivial. In wind energy tenders, a lack of execution readiness (due to factors like land, grid and the limited number of turbine suppliers) has led to multiple auction undersubscriptions and cancellations, indicating that only those truly prepared should be bidding aggressively . The key point is that winning a tender you cannot deliver on is a pyrrhic victory - it ties up your capital, invites penalties, and can tarnish your credibility with policymakers, investors, and future tender committees.

Proven Strategies to Win (Execution Planning):

The simplest antidote to overextension is self-awareness and prudent planning. Before bidding, companies should honestly evaluate their execution capabilities: How many megawatts can we realistically commission in the given timeframe? Do we have the teams for development, EPC, and O&M in those locations? If not, can we readily scale up or partner with someone who does? A winning strategy is often to partner or form consortia - for example, an experienced EPC firm or a local developer can strengthen a bid team. Also, choose your battles: focus on tenders that match your strengths (technology, region, size). If your expertise is solar PV, jumping into a complex solar-plus-storage tender just because it’s large could backfire unless you’ve done the homework or roped in expertise. Pipeline management is crucial - staggering project start dates and having a clear resource allocation plan ensures you don’t stretch your organization too thin. Financially, maintain a strong balance sheet or reliable financing lines; avoid dependence on short-term funding that might dry up. It’s also critical to stay transparent with the tendering authority - if there are unforeseeable hurdles (like permitting delays), communicate and seek extensions before lapsing deadlines. Indian ministries have shown some flexibility by granting extensions for genuine issues (for instance, delays caused by pandemic or new import rules) , but these are discretionary and often one-time reliefs. The proven strategy to truly “win” in tendering is not just to bag contracts, but to commission projects successfully. Each completed project on time enhances your reputation and future prospects. Thus, bid on what you can build. By aligning your bidding appetite with your execution muscle, you ensure that a win on paper becomes a win in reality - yielding revenue, profits, and growth rather than liquidated damages or forfeited guarantees. As the old saying goes, under-promise and over-deliver - or in this context, bid within your means and then outperform expectations to solidify your standing as a reliable player in the energy sector.

Conclusion

Competitive tendering in India’s energy sector will continue to be a primary vehicle for achieving the country’s renewable energy goals. The stakes - and rewards - are enormous: multi-gigawatt auctions, investment flows of billions of dollars, and the prestige of contributing to India’s green transformation. In this high-stakes arena, companies that learn from past mistakes and adopt a measured, informed bidding strategy are the ones poised to thrive. The five common errors outlined above - from compliance lapses and cost misjudgments to aggressive bidding, neglecting PPA risks, and overextending capacity - have tripped up even seasoned players. However, each mistake comes with a corresponding lesson and strategy: by ensuring thorough compliance, stress-testing financial assumptions, bidding rationally, securing the revenue stream, and matching commitments to capabilities, energy companies can significantly improve their tender success rate.

It’s heartening to see that both industry and government are responding to these challenges. Procurement authorities are refining tender rules (for example, requiring pre-arranged buyers or payment security mechanisms to mitigate offtaker risk ) and acknowledging legitimate difficulties (such as treating certain cost escalations as change in law ). But ultimately, it is up to bidders to exercise due diligence and restraint. An old proverb says, “Once bitten, twice shy.” The Indian energy sector has had its “once bitten” moments - ultra-low bids gone awry, projects stuck or canceled, guarantees encashed - and those experiences are now shaping wiser approaches. Tender bidding is not just about winning contracts at any cost; it’s about winning the right contracts, at the right price, and executing them well. Energy sector professionals who internalize this principle and back it up with data-driven decision making and strategic planning will find that they not only win tenders, but also build profitable and resilient project portfolios. In the long run, that is a win-win for the company and for India’s clean energy future.