Amendment proposed in Electricity Act to enforce renewable energy purchase obligation

Most state discoms are not meeting RPO targets because electricity regulatory commissions do not penalise them, says renewable energy ministry

By Ankur Paliwal
Published: Friday 18 October 2013

Most states in India are not meeting their targets for purchase of renewable energy. To set matters right, the Union Ministry of New and Renewable Energy (MRNE) has asked the Union power ministry to amend the Electricity Act. It wants provisions in Act to ensure strict implementation of renewable energy targets by state governments. These targets are called renewable purchase obligation (RPO).

As the name suggests RPO is an obligation on state power distribution companies (discoms) to purchase a certain amount of renewable power. This amount or percentage is decided by state electricity regulatory commissions every year. As per the National Action Plan on Climate Change, India is supposed to gradually increase the share of renewable energy upto 15 per cent in the total energy mix by 2020.

“We have been noticing that most states discoms are not meeting RPOs. It is because state electricity regulatory commissions do not penalise discoms for not meeting targets. Though there is a provision of penalty of Rs 1 lakh, but either it is rarely enforced or even if it is imposed the amount is very less,” said Tarun Kapoor, joint secretary MNRE. Also, some state power regulatory commissions declare very less RPO targets or in some cases even keep them constant while there should be an increase in target percentage each year. That is why a need was felt to make clear provisions in The Electricity Act of 2003 so that renewable energy targets can be strictly and legally enforced, Kapoor added.

Some states like Andhra Pradesh have kept the RPO constant at 5 per cent from financial year 2011-12 till 2015-16. Only Rajasthan and Gujarat have been achieving their renewable purchase obligations because of high installation of renewable energy in these states.

The states are supposed to meet their RPO either through purchase of renewable power or by buying renewable energy certificates (REC). These certificates promote the sale of electricity from renewable sources to discoms at the prevailing conventional energy tariffs. While the price is lesser than high feed-in tariff, the remaining balance is recovered by selling the environmental attribute of generating this clean electricity in the form of RECs. One REC is equal to one unit of electricity which has a floor price and ceiling price. This price is determined in the energy exchange markets.

Energy exchange market needs boost
Currently, the demand for RECs is very poor as discoms are not buying them. In September this year, as many as 3.7 million RECs were lying unsold. Experts say that the market can pick up only when meeting RPO targets are strictly enforced.

MNRE’s letter is prompted by an order issued by the Maharashtra Electricity Regulatory Commission (MERC) in July this year, asking discoms to meet RPOs or face heavy penalties. It has ordered over 90 entities, including state distribution companies and private captive power consumers, to meet their renewable purchase obligation of past four years cumulatively, beginning from 2010-11 by March 2014. The amount of penalty would be determined by MERC. The commission has set up a committee for timely collection and review of data with regard to compliance of RPO. “MERC’s order is welcome move and is going to set a precedent,” said Kapoor.

State utilities find renewables expensive
However, most state governments in their defence say that it is because of the poor financial health of the discoms that they are not able to buy the relatively expensive renewable power. “Every time we try to press for RPO implementation, we are told by discoms that they don’t have money,” said an official of Uttar Pradesh Non Conventional Energy Development Agency. “Discoms do not even calculate and declare how much percentage of renewable have they procured. They are just not interested. We have no data of how much renewable power has been purchased in the state,” he said. Uttar Pradesh had to purchase six per cent of renewable energy in its total energy mix in 2012-2013.


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