State govts falter on purchase targets

Defaulters to not crack the whip on cash-strapped discoms

As the new government announces big-ticket projects in clean energy, the problem of a big shortfall in meeting the targets of renewable power purchase hasn’t diminished over the years. For 2013-14, the renewable power purchase obligation (RPO) met by the states is just half of the required target. With a few exceptions, almost no state has met its RPO target.

Even the star performer for the earlier two years, Gujarat, slipped from the top slot in 2013-14, with Chandigarh and Jammu & Kashmir taking the lead. Delhi’s achievement is zero.

RPO, launched in 2010, makes it obligatory for distribution companies (discoms), open-access consumers and captive power producers to meet part of their energy needs through ‘green’ energy. A pre-defined RPO target for all states currently ranges from three to 10 per cent of their total requirement. States or utilities unable to fulfil their RPO can buy Renewable Energy Certificates (RECs). Each of these represents 1 megawatt hour produced from a renewable energy source and are tradable at power exchanges.

RPO is divided into a solar and non-solar portion. No state has, in the past three years, met its RPO. Last year, only Gujarat and Rajasthan met their solar RPO targets. Non-solar RPO compliance has been negligible overall. There is no strict provision of a penalty for non-compliance.

Maharashtra in 2013 asked all its utilities to meet their obligation or face a penalty but none has been imposed. The state achieved 80 per cent of its RPO. In May this year, the Joint Electricity Regulatory Commission for Goa and the Union Territories (barring Delhi) directed discoms to meet their annual RPO or pay Rs 110 crore as penalty. Chandigarh apart, all UTs have less than 60 per cent compliance.

Government officials said there is an option with the State Electricity Regulatory Commission (SERC) to direct their respective discom under the provision of section 108 of the Electricity Act to either buy renewable power or REC. It also allows invoking penal provisions against the defaulting discoms. However, of the 9.3 million RECs issued in September, around 8.5 million remained unsold. REC prices have also crashed, with solar REC at Rs 9.3 per kilowatt hour. This is still higher than the declining price of solar power.

“State governments usually go lenient on the discoms as many of these are cash-crunched. States which announced a penalty did not impose it (for this reason),” said an executive of a power trading firm.

The central government is mulling big projects to help states achieve their RPO but the industry feels this will take too much time. “There needs to be stricter compliance, as RECs are available. The regulator needs to review the floor and forbearance price of RECs and lower it considerably, especially of solar,” said the executive quoted above.