Distribution Companies in India could be obliged to purchase 8% of their power generation from solar sources by March 2019, up from the original target of 3% by 2022, under a proposed policy amendment by India’s ministry of power.
A Renewable Purchase Obligation (RPO) mechanism is in place to drive demand for solar power in India until parity in terms of landed cost of power between renewables and other energy sources is widely reached.
To comply with RPOs, electricity distributors or ‘discoms’ can either generate a minimum amount of renewable power or purchase renewable energy certificates (RECs) to make up for shortfalls.
The proposed amendments to the Tariff Policy, under the Electricity Act 2003, raise the minimum amount of renewable power to be purchased to meet the obligation.
According to consultancy firm Bridge To India, the new RPO target implies an aggregate solar capacity of 69 GW by 2019, which is equal to 87% growth per annum. Although this is compliant with the 100GW generation target by 2022, Bridge To India said this is “nonetheless extremely ambitious”.
According to the consultancy, the country’s new government wants to implement stricter enforcement of the RPO to push the solar market.
Victor Thamburaj chief executive of iPLON, a German technology firm supplying automated solar power equipment to Indian projects told PV Tech: “The lesson learned from Germany is that to enforce RPOs is very difficult, so the government should come up with a strategy on how to enforce it, and make this a little bit transparent, so people are aware of it over 3-5 years. They also have to explain why they want to do this in a white paper or in better communications with the people.”
Vineet Mittal, vice chairman for India-based renewable energy project developer Welspun Renewables, said: “RPOs should be made enforceable for state distribution licensees, open access consumers and captive consumers of power. The sector is not witnessing the percentage increase in solar energy consumption to the degree it should have experienced. Without a legal enforcement mechanism for RPOs, India will not be able to make a steady and sustainable transition to green economy.”
In further attempts to encourage renewable energy, the ministry of power's proposed amendments state that coal-fired power plants installed after a specified date will have to be accompanied by a renewable power plant for at least 10% of their coal generating capacity.
Furthermore, discoms will be able to procure bundled solar power from existing conventional power generators on a cost plus basis to meet their RPOs.
However, Mittal said: “Renewable Generation Obligation (RGO) will increase the strain on the thermal generators. Approximately, 136GW of private sector capacity is in crisis. Implementing RGO will further increase the financial strain on these players, which in turn, will increase the systemic risk on the banking and financial sector. Hence, RGO is not a good thing given the current state of affairs. The priority should be to fix the RPO and have a periodic revision of REC.”
The proposed amendments would also exempt renewable sources of energy from inter-state transmission charges until further notice from central government.
Bridge to India said: “This would encourage a large concentration of solar plants in resource rich states, such as Rajasthan and Gujarat provided the transmission capacity is sufficiently boosted.”
The consultancy said all the proposed amendments could be a “very good driver” for boosting the renewable sector. However, it also warned that enforcement of RPOs has been weak and bringing all the country’s states on board will be challenging.
In February, PV Tech reported that the ministry for new and renewable energy would enforce the RPOs by introducing penalties for non-compliance as part of an impending new energy policy.
(This article has been amended to add comment from Welspun Renewables and to say that it is distribution companies not State Electricity Regulatory Commissions that are subjetc to the RPO)