MERC Rejects MEDA’s Plea For 50% Local RE Procurement By Discoms

Imposing Restriction of Procuring 50% RPO Requirement from Projects Located in Maharashtra Anti-competitive: MERC

The Maharashtra Energy Development Agency had filed a petition with the Maharashtra Electricity Regulatory Commission (MERC) asking it to issue appropriate directions to distribution licensees (discoms) to meet 50% of total Renewable Purchase Obligation (RPO) requirement by purchase of energy from Renewable Sources within the State.

Maharashtra has achieved installed capacity of 10,799 MW as on 30 September 2022, wherein it has achieved only 7 % of the total potential within the State. GoM has issued RE Generation Policy, 2020 on 31 December 2020 (RE Policy 2020) wherein it has set the target of capacity addition of 17,360 MW by 2025 (as per amendment dated 30 June 2022 the deadline was changed to year 2027).

Incentives to Solar Developers under Maharashtra RE Policy

The amendment issued by GoM to RE Policy 2020 on 30 June 2022 provides various incentives to developers including electricity duty exemption for 10 years for captive use for solar, wind, urban industrial waste and biogas cogen projects within the State.
The said amendment also provides that 50% of the total Renewable Purchase Obligation (RPO) of the distribution licensees within Maharashtra has to be met from the sources within Maharashtra.

Drastic Failure to Meet RPO Targets

As per RPO compliance orders issued by the Commission for the Distribution Licensees within Maharashtra up to 2019-20, it is observed that there has been significant cumulative shortfall in meeting the RPO targets specified by the Commission. Total RPO shortfall is 15070 MU’s (non-solar: 9907 MU’s and solar: 5163 MU’s).

Based on the sales estimate and Input Energy of the various distribution licensees (MSEDCL, AEML-D, TPC-D, BEST, MBPPL, Gigaplex, KRCIPPL) approved by the Commission in the multi year tariff orders issued on 30 March, 2020 for FY 2023-24, FY 2024-25 and the RPO targets specified by the Commission through RPO Regulations, 2019 for the relevant years, the total renewable capacity (at 20% CUF) required to meet the RPO is 36049 MU’s ( 20576 MW) and 42363 MU’s ( 24180 MW) for FY 2023-24 and FY 2024-25 respectively.

RPO Targets 

The total capacity required to meet the 50% RPO from within the state is 10250 MW and 12100 MW for FY 2023-24 and FY 2024-25 respectively. There is significant potential within the State to meet 50% RPO.

The Commission may call for the data from the respective Discoms to assess the incremental RPO requirement considering the sales projections, PPAs signed by Discoms and whether such source of power is within or outside the State.

Considering the RPO% specified by Ministry of Power, GoI vide its Order dated 22 July, 2022, the total capacity required to meet the RPO at the end of year FY2029-30 is 85118MU’s (48584 MW). Considering 50% RPO to be met from within the State, the capacity required is 24250 MW. It is submitted that the State has enough potential for such capacity addition.

Tariffs Discovered

An important aspect considered by the Commission while specifying the RPO targets is the impact of tariff on the consumers. Based on a compilation of the details of tariff adoption order issued by the Commission with refernece to solar/hybrid sources for various Discoms, from Year 2019 to Year 2021 it is observed that there has been hardly any difference in tariff discovered from Inter-state and Intra-State projects. Thus, MEDA submits that mandating 50% purchase of RE from within the state will not have any impact on consumer tariff vis-à-vis allowing purchase from anywhere within the Country

As a promotional measure, inter-state transmission charges have been waived off for the RE projects to be commissioned before June 2025. In view of the same, the projects commissioned outside the state are competitive. Once the promotional measures end, the tariff within the State will be competitive as compared to projects outside the State.

MEDA states that specifying that 50% RPO should be met from within the State will not only bring investment within the State but also has other benefits as given below MEDA.

Delays in Project Commissioning, Measures Suggested

As far as the ability of distribution licensees to contract and procure incremental RE energy is concerned (timelines and capacity), MEDA submits that all distribution licensees are inviting bids for procurement of RE power. However, even after signing  of the PPA, minimum period of 12-18 months is required for commissioning of the project.

Possibilities of issues related to land acquisition; Right of Way (RoW) permission cannot be ruled out which could delay commissioning of the projects. Hence, MEDA says that the Commission may consider specifying 50% RPO target to be met within the State in a gradual manner so as to provide sufficient time to Distribution Licensee for entering into new contracts for procurement of RE within the State and also to provide sufficient time for commissioning of such projects.

MERC Quashes MEDA’s Petition 

MERC states that the Government of Maharashtra has provided additional incentives to the projects to be set up in Maharashtra to make them competitive vis-à-vis inter-state projects. Thus, the intent of the GoM policy is not to restrict competition but to increase competition by providing additional incentives to intra-state plants so as to make them competitive.

Also, regarding meeting 50% RPO requirement from the RE plants in Maharashtra, The Commission has observed that it is just a suggestive approach mentioned in policy document and the GoM has clearly stated that on this aspect it will take necessary action as per decision of the Commission. Hence it cannot be considered as mandate under the policy.

The Commission further notes that with expiry of waiver of inter-state transmission charges, intra-state RE projects would be able to compete with RE projects located outside Maharashtra. Further imposing restriction of procuring 50% RPO requirement from projects located in Maharashtra would be anti-competitive.

Further when entities who are required to comply with RPO also includes captive and open access consumers consuming power from conventional sources, imposing such restrictions only on distribution licensee would lead to discrimination which is not at all desirable. Hence, the Commission is not inclined to impose any restriction of procuring 50% of RPO requirement from projects within Maharashtra.

The Commission further notes that delays in commissioning of projects and consequently shortfall in meeting the RPO targets of the distribution licensees needs to be addressed by MEDA. It has directed the Agency to proactively smoothen this entire process for speedy development of the RE projects by enabling a coordinated effort amongst various concerned entities, specifically since, total RPO target of 43% is to be achieved by the year 2030.