RPO com­pli­ance needs to im­prove fast for In­dia to meet its so­lar in­stal­la­tion tar­gets

Power Watch India - - GREEN AHEAD - By Raj Prabhu

Re­new­able 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 in­stal­la­tion goals.

Lack of com­pli­ance

Though In­dia has made re­mark­able progress over the last seven years (since 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 years – at 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 dis­tri­bu­tion com­pa­nies (dis­coms) are not com­ply­ing fully with their RPO tar­gets.

“Most states 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 RPOs,” said 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 say­ing, “these are the ini­tial days of dis­coms deal­ing with re­new­able en­ergy.”

If all states ad­here to RPO tar­gets set by the re­spec­tive SERCs, 17.7 GW of so­lar should be in­stalled by end of the cur­rent fi­nan­cial year. The cur­rent so­lar RPO is 2.75 per cent, ac­tual cu­mu­la­tive in­stal­la­tions as of 20 March 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

Twenty-five states and union ter­ri­to­ries are be­hind on their spec­i­fied so­lar RPO tar­gets for the cur­rent FY, for a so­lar RPO deficit of 2,033.94 MW (-64%).

Re­new­able en­ergy in­stal­la­tions in 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 Vidyut Vi­tran.

“In 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,” said a Ker­ala State Elec­tric­ity Board of­fi­cial.

“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,” said a West Ben­gal Elec­tric­ity Dis­tri­bu­tion Com­pany Ltd of­fi­cial.

In Bi­har, grid-con­nec­tiv­ity and trans­mis­sion in­fra­struc­ture is in a state of ne­glect and is the rea­son be­hind why re­new­able en­ergy in­stal­la­tions are not tak­ing place, said a South Bi­har Power Dis­tri­bu­tion Com­pany Ltd of­fi­cial.

There are 22 states and union ter­ri­to­ries that are be­hind their non-so­lar RPO tar­gets. There is a non­so­lar RPO deficit of 9,088.11 MW.

Twenty-two states and union ter­ri­to­ries will re­quire over 9,088 MW to ful­fil the non-so­lar RPOs for FY2016-17. “To achieve even a three per cent RPO com­pli­ance by 2022, we would need ~34,000 MW of so­lar ca­pac­ity,” said an MNRE of­fi­cial.

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 fi­nan­cially un­sound.”

Tak­ing steps to­wards RPO com­pli­ance

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 per cent by 2022. It has also made it manda­tory for dis­coms to pro­cure 100 per cent of power gen­er­ated from waste-to-en­ergy projects.

In­ter­state trans­mis­sion charges and losses have been waived for wind and so­lar projects, and this could to a cer­tain ex­tent aid RPO.

The Green 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.

The fi­nan­cial con­cerns sur­round­ing dis­coms are be­ing ad­dressed through the Ujwal dis­com As­sur­ance Yo­jana (UDAY) pro­gramme, 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.

The World 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. By in­ter­link­ing var­i­ous gov­ern­ment in­cen­tives and poli­cies such as the in­te­grated power devel­op­ment pro­gramme, ru­ral elec­tri­fi­ca­tion, and the Vi­a­bil­ity Gap Fund­ing pro­gramme, 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 as com­pared to the cur­rent pro­ject com­ple­tion time-frames, stated a MNRE of­fi­cial.

Raj Prabhu, CEO of Mer­com Cap­i­tal Group said, “In the In­dian mar­ket, it is not just about strict com­pli­ance and pe­nal­is­ing 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.”

The writer is CEO and Co-Founder of Mer­com Cap­i­tal Group, llc.

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