Failure by States to Pay for Renewable Power May Trip Green Energy Target by 2022

Renewable purchase obligation (RPO) refers to the mandate imposed by law on some entities, mainly power distribution companies, to procure a certain part of their power requirement from renewable sources.

States are lagging behind in meeting their renewable purchase obligation target which is a key policy instrument to meet the goal of installing 175 gigawatt (GW) of green energy by 2022, stakeholders and experts say.

Renewable purchase obligation (RPO) refers to the mandate imposed by law on some entities, mainly power distribution companies, to procure a certain part of their power requirement from renewable sources.

Consulting firm Bridge To India, in a recent report, said the Union Ministry of New and Renewable Energy has allocated individual targets for states in line with the eight per cent solar RPO target for the country for March 2022, but says actual performance varies highly across states and enforcement is poor.

“Power being a concurrent subject, solar renewable purchase obligation targets are actually administered and regulated at the state level. Unfortunately, because of poor finances of discoms (power distribution companies), the obligations have never been enforced anywhere in India on a consistent basis,” the consulting firm’s Managing Director Vinay Rustagi told IANS.

He alleged that the state electricity regulators have also been “very lenient”.

The market intelligence provider and research firm Mercom Capital Group also pointed out that India made remarkable progress over the last seven years since the inception of the Jawaharlal Nehru National Solar Mission (JNNSM) in 2010. But around 10 GW of solar installation is “not as impressive as it sounds”.

The 2022 target includes 60 GW from wind power, 100 GW from solar power, 10 GW from biomass power and five GW from small-hydro power.

India needs to install 90 GW of solar in five years — a rate of 18 GW a year to meet the target.

“Due to the lack of enforcement of RPO regulations and the absence of penalties when obligations are not met, many of the state discoms are not complying fully with their RPO targets,” the research firm said, adding if all states had adhered to the RPO targets set by respective state electricity regulatory commissions, 17.7 GW of solar power would have been installed by 2016-17.

“In the Indian market, strict compliance and penalising states to push for higher installations levels are not enough. There are a lot of underlying issues that the government needs to address — discom financials, must-run status, transmission and evacuation issues, on-time payments and payment guarantees,” the research firm’s CEO Raj Prabhu told IANS.

In general, southern states along with Gujarat, Rajasthan and Madhya Pradesh have been at the forefront of compliance, whereas Maharashtra and Uttar Pradesh are lagging far behind the target, Rustagi said. In respect of eastern states, Solar expert S.P. Gon Chaudhuri said lower penetration of renewable energy in the region was one of the major reasons for West Bengal, Jharkhand, Odisha and Bihar failing to meet the RPO target.

The eastern states, which are coal rich, have not done enough to attract private investors in renewable energy and experts say these states must incentivise renewable energy developers.

“West Bengal’s RPO target by 2022 is 5,000 megawatt while its present achievement was only 27 megawatt. An estimated Rs 20,000 crore of investments would be required in the next 4-5 years to meet the state’s target. The state cannot invest such a huge amount. Private participation is the need of the hour,” Chaudhuri told IANS.

Rustagi said RPO targets are being scaled up every year; so even if states buy an increasing amount of renewable energy, their relative performance is unlikely to change in the next 3-4 years.

According to the Mercom Capital’s research note, as states crawl to fulfil their renewable purchase obligation, cumulative installation figures for solar and wind energy have increased exponentially, but unless compliance improves drastically it will be a challenge to meet the 2022 installation goals.

Source: IANS