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Maharashtra cracks the whip on renewable power obligations

According to reports,  in a breakthrough decision for wind and solar power industry, the power regulator in Maharashtra has directed all distribution firms to meet their obligation for buying renewable energy in the past four years, and said they will have to pay a stiff penalty if the backlog of their “renewable purchase obligation (RPO)” is not cleared by March 2014.

“All obligated entities are directed to fulfil their RPO targets for both solar and non-solar for all four years, i.e., financial year 2010-11, 2011-12, 2012-13 and 2013-14, cumulatively, before March 31, 2014. The Commission shall enforce this in letter and in spirit,” the Maharashtra Electricity Regulatory Commission (MERC) said in a recent order. This order is the strongest-ever decision taken on RPO by any state or central authority since the launch of the RPO programme.

As per the National Tariff Policy, 2006, all states are mandated to procure a part of their power demand from renewable sources. The order would impact about 90 entities, including not only distribution companies, but also captive users and open-access consumers.

Last year, no state except the renewable power-rich states of Gujarat and Rajasthan, complied with their RPO targets.

All states are supposed to meet their RPO demand either through direct purchase of renewable-based power or by trading ‘Renewable Energy Certificates (REC)’. REC has been receiving tepid demand from distribution companies, who have cited finance crunch and high cost of renewable-based power as the reason for non-compliance of RPO year-on-year.

The REC market crashed recently with both solar and non-solar certificate price stooping to their floor price. There are currently 27 lakh RECs lying unsold. “This laudable effort would give some impetus to the REC market. There are enough certificates in the market to meet the state’s demand,” said Rajesh Mediratta, director (business development), India Energy Exchange.

MERC officials informed that a committee has also been set up for timely collection and review of data with regards to compliance of RPO. The panel would also maintain a record of all open-access consumers and captive users and their REC trading. The performance of all obligated entities would be reviewed every two months.

“If the obligated entity fails to comply with the RPO target as provided in these regulations during any year and fails to purchase the required quantum of RECs, the state commission may direct the obligated entity to deposit into a separate fund such amount as the commission may determine on the basis of the shortfall in units of RPO, RPO regulatory charges and the forbearance price decided by the central commission; separately in respect of solar and non-solar RPO,” said the order.

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