Ministry of Power announces renewed RPO trajectory for long-term

Ministry of Power (MoP) recently announced an order for long-term growth trajectory of Renewable Purchase Obligation (RPO) for solar and Non-solar for a period of three years i.e. 2019-20 to 2021-2022. In order to achieve the target of 175 GW of RE by March 2022, the MoP in consultation with MNRE notified the long-term trajectory for RPO as below:

The obligations described are on total consumption of electricity by an obligated entity excluding consumption from the hydro source of power. It is necessary that the achievements of solar RPO compliance are up to 85% and above. If so, the remaining shortfall if any can be met by excess non-solar purchased beyond Non-solar RPO for that particular year. The same goes in case of Non-solar compliance which will be met by solar, beyond the solar RPO for that year.

RPO mechanism has been in the frame for a long time but have its own share of ups and down. Since last year, the process is getting back on trade and REC trading is also working consistently. MNRE recently announced about building an RPO compliance cell providing aid to SERCs for better implementation.

An article by Quartz India has also talked about how the Indian government is now pursuing major energy consumers to take the renewable energy route and has quoted entrepreneurs in the industry expressing their views on the current developments.

The trend till now has seen states not following their RPO obligations religiously. It is known by all the states that RPO is very important and abiding by it is mandatory. The order also falls under the National Tariff Policy 2016, which in itself is a recommendatory document in nature.

The updated RPO targets also come into the picture after the country’s  Power Minister R.K.Singh announced in an interview about the increased capacity target to 227 GW from 175 GW earlier.

RPO COMPLIANCE TO DRIVE THE COUNTRY TOWARDS RENEWABLE ENERGY GROWTH:

In an article in the Economic Times, the importance of RPOs has been highlighted by saying that RPOs are the most important instruments towards achieving the lofty goal of installing 175 GW of renewable energy by 2022. Last year, the Ministry of Power had declared the National RPO Trajectory but not much was complied with. As per the CEO of Mercam Capital Group, a number of issues need to be addressed in order to make sure that RPOs are complied with such as evacuation issues, DISCOM financials, etc. The government needs to provide a conducive environment for renewable installations to thrive. In some cases, it has so happened that the state electricity regulatory commissions have allowed a carry forward of the shortfall of DISCOMS which one of the reasons for non-compliance.

On the other hand, it can also be said that a number of changes are being made from the government’s side as well to make sure that RPOs are complied with. A new policy has been introduced in which it is estimated that solar RPO will be 8% by 2022. Also, it also mandates the DISCOMS to procure 100% power from waste to energy projects. The World Bank as well as some other banks are providing financial support so as to increase the number of renewable energy installation in India.

In the last trading session, a huge gap was seen in the number of solar and non-solar RECs traded. Now, with the reduction in floor and forbearance prices of RECs by Central Electricity Regulatory Commission, compliance towards RPOs may get further delayed.

National RPO Trajectory Declared

The Ministry of Power (MoP) declared the national RPO trajectory recently. According to the notification, overall RPO % is expected to be 11.5% in 2016-17 (including 2.75% of solar), and rising to 17% in three years (including 6.75% solar).

This trajectory is higher than the current RPO in most states. The onus will now be on the SERCs to amend their RPO regulations to bring it in line with the notification. Infact, Chhattisgarh has already made a beginning with draft regulations published within a week of the notification (the draft regulation is analyzed in the second part of this article).

The notification mentions two other important aspects of calculating RPO:

  •  RPO to be applied on co-generation power
  •  Consumption from hydro sources to be excluded

Conclusion:

Announcing the national RPO trajectory is a welcome step. The entire objective of the RPO and REC regulations was to have a uniform consumption of RE power across the country even though the RE resources differ widely across states. However, this objective was lost along the way. The National RPO trajectory can go a long way is having uniform RPO% across the country. However, there are some issues with the RPO trajectory notification:

  • “Are SERCs obligated to follow? This question remain unanswered. The notification itself says…”
  • SERCs may consider to notify RPO for their respective states in line with the aforesaid uniform RPO trajectory.
  • The RPO trajectory itself has been declared for 3 years only. It would have been good to see a longer trajectory.
  • The exclusion of hydro will need amendments in state RPO regulations
  • Similarly, including co-generation power in RPO calculations will require some states like Rajasthan and MP to amend their regulations

Chhattisgarh Draft RPO regulations – Analysis
Immediately after the notification of the national RPO trajectory, Chhattisgarh announced draft RPO regulations. Key points on the draft regulations are:

  • The RPO % is proposed to increase steeply – from 7.25% in 2015-16 to 20% in 2020-21.
  •  The regulation proposes to apply RPO on co-generation power
  •  Both these changes will have significant impact on Chhattisgarh. It is a state with large captive generation capacity, a large portion of which is from co-generation.

 

 

* Draft regulation

** In Karnataka RPO differs slightly for each Discoms

 

Go to top