- Most Indian states default on renewable purchase obligations for five consecutive years
- Total deficit in MNRE RPO Targets up to FY 2016-17 is 6.9 GW, and for the current fiscal year, it accounts for 2,033.94 MW
- Financial health of power distribution companies along with the culture of not penalizing them in case of non-compliance of RPO targets in a specific year are some of the reasons for this mismatch
- As per government officials, to achieve a 3% RPO compliance by 2022, the country would need 34,000 MW of solar capacity
A majority of Indian states and union territories have not been able to comply with their allotted renewable purchase obligations (RPO) for five years in a row. The RPO deficit of the Ministry of New and Renewable Energy’s (MNRE) targets up to fiscal year 2016-17 is 6.9 GW. In the current financial year, even states like Gujarat and Rajasthan have not reached their targets, according to research firm Mercom Capital Group.
“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 by FY2016-17,” states Mercom.
In a detailed analysis, Mercom has found that as many as 25 states and union territories are currently running behind on their specified solar RPO targets for the current financial year. The solar RPO deficit is 2,033.94 MW or 64% less than targeted.
Power distribution companies (discoms) in the Indian states have the task of procuring at least 2.75% of their total power consumption from solar power plants in 2016-17 (see Green Targets For Indian Power Distributors).
While Dadar & Nagar Haveli, Sikkim, Meghalaya and Manipur have a 100% solar RPO deficit in financial year 2016-17, some of the big states include Maharashtra (50%), Delhi (43%), Uttar Pradesh (58.3%).
A total of 22 states and union territories will need more than 9,088 MW to fulfill their non-solar RPOs for FY 2016-17. As for solar, Mercom quoted an MNRE official saying, “To achieve even a 3% RPO compliance by 2022, we would need 34,000 MW of solar capacity.”
Reasons for non-compliance of RPO targets
A number of factors are responsible for this state of affairs, despite most regions taking individual RPO targets. Ill-financial health of discoms is one of the major reasons. They do not have enough money to pay solar power developers, and instead resort to buying cheaper power from the energy exchange. However, the Indian Energy Exchange (IEX) has sought suggestions to introduce renewable energy contracts (see IEX Seeks Comments For Solar-Day Ahead Market).
Another factor is the culture of not penalizing discoms for non-compliance of their RPO targets. More often than not, several state electricity regulatory commissions (SERCs) allow discoms to carry forward their RPO shortfall to the next year.
Administration working on it
The government is taking steps to encourage RPO compliance. These measures include introducing new policies, improved transmission measures and financial support. As per a new tariff policy, a 8% solar RPO will need to be secured till 2022. Transmission issues will be addressed with the creation of Green Energy Transmission Corridors (see German Loan For Indian Green Energy Corridors).
The country is also planning to create a separate Central Transmission Utility (CTU) to manage the inter-state electricity transmission network (see India Contemplating Separate Transmission Entity).
The government is working on improving discoms financial health under a scheme called Ujwal DISCOM Assurance Yojna (UDAY).
“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.