Will States Comply with the New Solar RPO Target?
Government creates RPO Compliance Cell to track progress made by entities in meeting their targets
The Ministry for Power recently announced revised solar renewable purchase obligation (RPO) goals for up to FY 2012-22. RPO is the single most important policy driving renewable energy installations in India and the revised RPOs are expected to help achieve the Modi Administration’s aggressive goal of installing 175 GW by 2022, with solar comprising 100 GW of this target.
For financial year (FY) 2019-2020 the solar RPO is set at 7.25 percent and non-solar RPO at 10.25 percent. The solar RPO for FY 2020-2021 is 8.75 percent and non-solar RPO is 10.25 percent. This increases to a solar RPO of 10.50 percent in FY 2021-2022 and non-solar RPO of 10.50 percent in FY 2021-2022.
The RPO targets have been hiked to help increase the momentum of renewable energy installations, especially solar, across all the states in the country.
However, despite the ambitious targets, RPO compliance has not been up to the mark. Few states and union territories strictly adhere to RPO compliance. Mercom previously reported that 16 states and union territories achieved less than 60 percent of their respective RPOs in 2016-17. Compliance needs to be seriously ramped up if there is any chance of the new RPOs targets being met.
Replying to a question regarding RPO enforcement, an MNRE official said, “We (MNRE) have created a compliance cell for RPOs in the country. Earlier, there were set RPOs, but nobody to oversee the enforcement. The state electricity regulatory commissions (SERCs) used to assign RPOs but that was the end of their job, they did not see to it whether the RPO was being complied with or not.”
“We realized that non-enforcement of RPO compliance was holding the renewable energy sector back, as states had a leeway without interruption by authorities. The RPO compliance cell will coordinate with states, the central electricity regulatory commission (CERC) and SERCs to ensure RPO compliance,” added the MNRE official.
Elaborating further on how this cell would function, the MNRE official said, “The cell will make monthly reports of RPO compliance data, inform the entities how behind they are from their targets and will also take up non-compliance related issues with the authorities.”
When asked whether these RPO targets will be viable for states and union territories, the MNRE official added, “The MoP has issued RPO targets keeping in mind the entire country not just particular pockets which are rich in renewable energy. The entities can utilize the renewable energy certificate (REC) market to comply with RPO obligation. According to my knowledge there is a huge backlog of RECs, both solar and non-solar. The other option is to develop projects; almost all states and union territories are also participating in solar programs and developing other renewable energy generating sources like biomass, biogas etc.”
The MNRE official also told Mercom, the government has now relaxed certain provisions of RPO compliance. “Now, if there is a shortfall of about 15 percent, either of the sources can be utilized to comply with either of the RPOs”.
Elaborating on this, he added, “For instance, take a scenario where you are falling short on a solar RPO by 5, 10 percent. In such a scenario, you can utilize excess wind power generated, above non-solar RPO compliance to comply with solar RPO. The maximum deviation will be 15 percent.”
To bring more clarity on the subject, Mercom also contacted an official at Joint Electricity Regulatory Commission for the state of Goa and Union Territories (JERC), who commented, “Look at the size of the union territories and the state of Goa, where is the land to develop massive projects? We cannot, the only option is turning to the REC market. It is good buying RECs as we are helping out renewable energy generators, but we also want to knock off conventional power from our grid, that we are physically using”
The official further said, “If we are buying physical power and if it is being fed to the grid we can remove that much of our demand to be contracted from conventional sources of energy. We would be more willing to do that instead of just purchasing RECs. Right now, entities mostly trust SECI, NVVN, NTPC for such supplies, efforts should be made to bring many private generators to this fold. If private players start supplying solar power, distribution companies will be more than willing to purchase, but as it is not so, REC market looks as the only viable option right now.”
When contacted, an official at the Tamil Nadu Electricity Regulatory Commission (TNERC) said, “In the MoP RPO trajectory order, it is also mentioned that if there is a shortfall in solar generation leading to about 15 percent less compliance with solar RPO, then we can use excess wind generation to comply with up to 15 percent of solar RPO.”
When asked whether the new targets are steep, the TNERC official said, “To achieve the target of 175 GW by 2022, these targets are necessary. It is not that the MoP just now informed the states and union territories about these RPO targets, everyone knew they were coming and everyone had been informed in 2014 itself when RPO targets were set for the first time.”
The ISTS charges have also been discounted for renewable energy projects, so we do not see how if proper effort is put in, can states miss, RPO targets, added the TNERC official.
“As long as solar is cheaper than other sources of energy, states will continue to procure solar. It is a matter of DISCOM financials as much as it is of compliance. Right now, it looks like solar will continue to get cheaper unless the government decides to impose a tariff on imported components. If solar gets more expensive, as we have seen in the past, tenders and procurement will slow and so will RPO compliance,” said Raj Prabhu, CEO of Mercom Capital Group.