Purchase Obligation (RPO) is the single most important policy driving renewable
energy installations in India towards achieving the aggressive goal of
installing 175 GW by 2022 with solar making up 100 GW. Over the past three
years, as states scrambled to fulfill their RPOs, cumulative installation
figures for solar and wind energy increased exponentially, but unless
compliance improves drastically it will be a challenge to meet the lofty 2022
capacity of grid interactive solar power in the country at the beginning of the
11th five-year plan period was zero. This rose to 2,656 MW by March
2014, and we have now crossed 10 GW of solar thanks to RPO,” stated a Ministry
of New and Renewable Energy (MNRE) official. Trading in renewable energy
certificates (RECs) has also increased. States with high solar and wind
potential are tendering more projects. “Direct purchase of electricity
generated from renewable energy sources was the preferred option to meet RPOs.
Between 2010 and 2014, only 4.77 percent of RPO compliance was through REC
mode, this has changed now,” stated another MNRE official.
Lack of Compliance:
Though India has
made remarkable progress over the last seven years (since the inception of the
JNNSM in 2010) the 10 GW of solar installations is not as impressive as it
sounds. India needs to install 90 GW of solar in five year – a rate of 18 GW
per year. Most states have specified RPO targets. However, due to the lack of
enforcement of RPO regulations and the absence of penalties when obligations
are not met, many of the state DISCOMs (distribution companies) are not
complying fully with their RPO targets.
have defaulted on their RPOs, and this is the fifth year in a row. In the
current financial year even Gujarat and Rajasthan have not been able to comply
with state RPO,” stated a Central Electricity Regulatory
Commission (CERC) official.
In some cases,
rather than imposing a penalty on defaulters, the state electricity regulatory
commissions (SERCs) have allowed DISCOMs to carry the shortfall forward to the
next year. This exemption made by Delhi Electricity Regulatory
Commission (DERC) stands out in this aspect, as the DERC had not
imposed a penalty stating, “these are the initial days of DISCOMs dealing with
If all states
adhere to the RPO targets set by respective SERCs, 17.7 GW of solar should be
installed by end of the current financial year. The current solar RPO is 2.75
percent, actual cumulative installations as of March 20, 2017, comes to 10.8 GW
according to Mercom India Solar Project Tracker. The RPO deficit is 6.9
GW (-39%) based on MNRE RPO targets for upto FY2016-17.
How States Have Fared So Far:
states and union territories are behind on their specified solar RPO targets
for the current financial year, for a solar RPO deficit of 2,033.94 MW (-64%).
installations in the state of Madhya Pradesh have gone up. The state was
affected by grid and transmission issues which slowed installations; but now
Madhya Pradesh is going to achieve all targets. The Rewa Solar Park will go a
long way to address our RPO, stated an official at Madhya Pradesh Paschim Kshetra
In the state of
Kerala, they rely on other states to import power. Kerala not meeting RPO is
largely due to the stagnant renewable energy sector in the state. We have not
witnessed large scale renewable energy installations in a long time, stated an
official at Kerala
State Electricity Board.
The growth in
generation capacity has been stagnant in West Bengal. This year new capacities
have been tendered and we are trying our best to comply with the RPO, stated an
official at West
Bengal Electricity Distribution Company Limited.
grid-connectivity and transmission infrastructure is in a state of neglect and
is the reason behind why renewable energy installations are not taking place,
stated an official at South
Bihar Power Distribution Company Limited.
There are 22
states and union territories that are behind their non-solar RPO targets. There
is a non-solar RPO deficit of 9,088.11 MW.
states and union territories will require over 9,088 MW to fulfil the non-solar
RPOs for FY2016-17.
“To achieve even
a three percent RPO compliance by 2022, we would need ~34,000 MW of solar
capacity,” stated an official at the MNRE.
A CERC official
commented that the financial turnaround of DISCOMs is vital to meeting RPO
targets. “For stricter RPO enforcement, the liquidity of DISCOMs is a key
consideration given that many of the state DISCOMs are cash strapped and
Taking Steps Towards RPO
A combination of
measures are being taken to encourage RPO compliance including new policies,
improved transmission measures and financial support.
A new tariff
policy is betting on RPOs to reach its 2022 installation goals. The policy
prescribes a solar RPO of eight percent by 2022. It has also made it mandatory
for DISCOMs to procure 100 percent of power generated from waste-to-energy
transmission charges and losses have been waived
for wind and solar projects, and this could to a certain extent aid RPO.
Energy Transmission Corridor which is currently under development is
expected to remove transmission bottlenecks. The current cost of wind and solar
power is coming close to being on par with thermal and other conventional
sources. Once this corridor is complete, the grid will allow for easy
evacuation and transmission of renewable energy, thus spurring project
developers, stated a SECI official.
concerns surrounding DISCOMs are being addressed through the Ujwal DISCOM
Assurance Yojana (UDAY) program, under which ~Rs.2.07
trillion (~$30.99 billion) in DISCOM debt has been restructured so far. If
UDAY fails to fix the financial issues ailing DISCOMs, solar uptake will suffer
and so will installations and RPO compliance.
Bank is making financing available for renewables in India and other
development banks are following suit. This has provided developers and EPC
contractors with easy financing at low rates and is bound to spur installation
activity, stated the SECI official.
various government incentives and policies such as the integrated power
development program, rural electrification, and the Viability Gap Funding
program, an environment can be created where states easily meet their RPOs,
stated the CERC official.
If states make
it easier for project developers like they did in Rewa,
states will easily meet their RPOs as projects will be developed in less time
compared to the current project completion timeframes, stated a MNRE official.
“In the Indian market, it is not just about strict
compliance and penalizing states to push for higher installations levels. There
are a lot of underlying issues that the government needs to address like DISCOM
financials, must-run status, transmission and evacuation issues, on-time
payments and payment guarantees, and deemed generation benefits. Solar
companies and investors have demonstrated that they are willing to take the
risk and invest in the market. It is the government that needs to catch up and provide
low-risk, conducive market conditions for renewable installations to thrive,”
said Raj Prabhu, CEO of Mercom Capital Group.