According to reports, most state electricity distribution utilities have failed to meet their renewable energy purchase obligation for 2011-2012, experts say, citing poor policy enforcement and lack of awareness as reason.
As per data, Rajasthan procured 276 mw of solar power in 2011-12, against its target of 62 mw, while Chhattisgarh and Gujarat met 97% and 52% of their solar power requirements, respectively. In the non-solar segment, procurement was negligible despite supply exceeding demand.
According to the India Energy Exchange, while solar power is costly and suffers from supply shortfall, non-solar sources of energy (wind, biomass) have few takers due to lack of steady returns. This has also affected the renewable energy certificate (REC) regime, the power-trading platform says.
“There is a contrasting trend in solar and non-solar RECs. There is huge demand for solar power but the projects have not come up, as developers are not getting bank loans on ground of RECs. On the other hand, in non-solar the demand is yet to pick up, hence hindering the returns of already established projects,” said Rajesh Mediratta, business development director at India Energy Exchange.
An REC, which represents 1mw-hour of power produced from a renewable energy source, is tradable at power exchanges. The states or utilities that are unable to fulfill their renewable energy purchase obligation (RPO) can buy these certificates to make up for shortfall in renewable power in their total energy mix.
RPO, launched in 2010, makes it obligatory for distribution companies, open-access consumers and captive power producers to meet part of their energy needs through green energy.
Users prefer RECs, which are valid for 365 days, to buying renewable power from the market, as they do not involve inter-state scheduling and shield traders from the uncertainty surrounding renewable power.
“The main reason for the demand resistance is because only a few states have shown real intent in achieving the RPO target and some obligated entities still question the applicability of RPO,” Mediratta said.
While the government wants state electricity regulatory committees (SERCs) to penalise defaulting distributions companies, the Central Electricity Regulation Commission (CERC) advocates a wait and watch policy.
“RPO is not taken seriously and we want the state electricity regulators to penalise the discoms that have fallen short of target,” said Tarun Kapoor, joint secretary in the ministry of new and renewable energy.
Distributions companies say they are low on funds and cannot buy costly solar power. “Discoms are cash strapped and solar power is costly is no excuse by the SERCs,” said Kapoor, “They have to comply by the RPO or pay penalty, which will come out to be costlier.”
Penalty for shortfall in units of RPO is calculated on the forbearance price, which is the ceiling price in the price band of renewable power. At present, solar power costs between 9.30 and 12.40 a unit while that of non-solar power ranges from 1.50 to 3.30.
“RPO as a concept hasn’t stabilised. Most states haven’t declared their RPO trajectory for the coming years. Each state will look at it differently and that will impact the tariff regime in the long run,” said CERC secretary Rajeev Bansal.
India Energy Exchange’s Mediratta said, “The future of REC hinges on how effectively SERCs communicate the need for compliance to the obligated entities. A greater impetus in sensitising the obligated entities for the need for compliance would go a long way in achieving the RPO targets. The SERCs and state nodal agencies are better positioned to do this.”
A few month ago, CERC drew an RPO trajectory in which it predicted the capacity addition by renewable energy during the 12th plan period could be 35,715 mw.