RPO compliance has become strict in the State of Maharashtra

On 22^nd July 2013, the Maharashtra Electricity Regulatory Commission (MERC) issued a landmark order for enhanced enforcement of Renewable Purchase Obligations (RPOs) in the State. The Commission has ordered Obligated Entities in Maharashtra to demonstrate compliance to RPO targets for four years starting from FY 2010-11 to FY 2013-14 cumulatively by 31^st March 2014 or face requisite fines that could be as high as Rs. 13.40/unit. This order is the strongest initiative towards enforcement of RPOs by any Electricity Regulatory Commission (ERC) in the country.

As per RPO regulations, obligated entities with total electricity demand of 1 MVA or more have to buy a certain percentage of their total electricity consumption from renewable energy source.

The order says ““All Obligated Entities i.e. Captive Power Producers / Open Access Consumers are directed to fulfill their RPO targets for both Solar and Non-Solar for all Four years i.e. FY 2010-11, FY 2011-12 , FY 2012-13 and FY 2013-14 cumulatively before 31^st March 2014. The Commission shall enforce this in letter and in spirit. (Emphasis added)”

The State of Maharashtra has traditionally been one of the leaders on some of the most important fronts in India. By the end of April 2013, the State of Maharashtra has total installed electricity generation capacity of 30,354 MW (State sector- 12,261 MW, Private sector- 11,466 MW and Central sector – 6,627 MW). This includes installed capacity of power utilities in Maharashtra including allocated shares in joint & central sector utilities. The break-up of total installed capacity shows healthy investment by private sector. Renewable energy constitutes 25% of total installed capacity (Renewable hydro – 3,332 MW and Other renewable energy -4,157 MW). Please click here to read more on electricity scenario of the State of Maharashtra.

This order will help in boosting Renewable Energy Certificates (REC) trading. RPO can be fulfilled by buying RECs on energy exchange. REC mechanism is largely dependent on enforcement of RPO. The responsibility of setting RPO targets and implementation is on State Electricity Regulatory Commissions (SERCs). Therefore, it is important for SERCs to strictly monitor RPO compliance by the obligated entities and enforce compliance as per their REC regulations in order to make the REC programme successful. Due to non compliance of RPO by obligated entities, sale of REC’s is not increasing from the inception of REC trading leading to financial losses for the renewable energy project developers. In addition, it also spreads wrong signal about financial viability of RE project under REC mechanism among developers.  Following tables shows REC trading scenario for the month of July 2013;

Table 1: Total IEX & PXIL Solar Trade

	Buy Bids	Sell Bids	Volume Traded	PriceRs. per REC	Trade Value  Rs. Crores
IEX	1,983	12,486	1,983	9,300	1.84
PXIL	46	9,194	46	9,300	0.04
Total	2,029	21,680	2,029		1.88

Table 2: Total IEX & PXIL Non-solar REC Trade

	Buy Bids	Sell Bids	Volume Traded	PriceRs. per REC	Trade Value  Rs. Crores
IEX	72,231	16,76, 875	72,231	1,500	10.84
PXIL	89,081	9,87,886	89,081	1,500	13.36
Total	1,61,312	26,64,761	1,61,312		24.20

From the table, it can be seen that the volume of REC traded is very less as compared to sell bids implying less interest by the obligated entities in buying RECs.

MERC has enforced RPO in the state aligned with the RPO (Compliance and Implementation of REC Framework, 2010) Regulations, Maharashtra.  As per these regulations, Maharashtra has set for itself a target of sourcing 9% of its energy demand from renewable energy sources by 2015-16. However, obligated entities have not been serious about  compliance which has resulted in huge backlogs against their respective renewable energy purchase targets. So far the Distribution Companies (DISCOMS) led by MSEDCL have performed very well in meeting their non-solar RPO targets. They are also expected to achieve their cumulative solar RPO targets within the next three years. Discoms procured closed to 7,500 MU of renewable energy in FY 2011-12.  In addition, State Discoms have done well by directly sourcing energy from RE sources, depending very little on Renewable Energy Certificates (RECs).

Companies in Renewable energy sector welcomed this order. Astonfield’s Co-Chairman Mr. Ameet Shah said;

“This announcement is a fundamental game changer for the Indian solar industry. RPOs are essential to installing more power; alleviating shortages and helping our economy run at full speed. The State of Maharashtra, one of the leading industrial states in the country, making such a big policy move towards enforcement confirms explicitly that the pricing for solar is now within an acceptable range for all users and non-compliance will not be tolerated any longer. The significance of this Order is that such enforcement will lead to a sustained demand for solar power through 2022 when the Solar RPO target is confirmed at 3% for all consumers. Moreover, it is expected that this initial list will expand at least 4-5 times in the coming year, correspondingly multiplying the market opportunity. The estimated total size for solar in India based on this policy is approximately 35,000 MW.”

The Maharashtra Electricity Regulatory Commission has taken many initiatives to promote discussion on RE and conventional energy sources in the State. Government of Maharashtra is well placed to formulate the State’s energy strategy for the next five years as well as the role of RE within it. A comprehensive energy policy and strategy framework is essential for stakeholders to hold conclusive debates. This order on RPO compliance is also one of the strategic decisions by MERC to promote renewable energy in the state.

Reference;

MERC RPO order 2013, CEA, Government of Maharashtra official website