Renewable Purchase Obligation

Renewable Purchase Obligation (RPO) is the requirement mandated by Central/State Regulatory Commission and is relevant to Distribution Licensee: power distribution companies (DISCOMs); Open Access Consumer: ones acquiring power from power exchanges (IEX/PXIL), from traders, via bilateral agreements and so on.

This is an important topic for all IAS exam aspirants.

Background

• The Electricity Act, 2003 entrusted on the Regulatory Commissions the specific responsibility of promotion of renewable energy sources.
• Pursuant to the enactment of the Electricity Act 2003, the State Electricity Regulatory Commissions (SERCs) are required to fix a minimum percentage of the total consumption of electricity in the area of a distribution licensee for purchase of energy from renewable energy sources.
• With the amendment of the Tariff Policy in January 2016, the State Electricity Regulatory Commissions (SERCs) are required to reserve a minimum percentage for the purchase of solar energy which shall be such that it reaches 8% of the total consumption of energy, excluding hydropower, by March 2022 or as notified by the Central Government from time to time.

How do Renewable Energy Certificates work?

• Renewable energy certificates exist to ensure all activities such as accounting, tracking, and assigning ownership to renewable electricity generation and use are carried out efficiently.
• RECs are the instrument that consumers must effectively make use of in order to substantiate their renewable electricity consumption.
• In India, RECs are traded on two power exchanges — IEX(Indian Energy Exchange) and PXIL-(Power Exchange of India).
• The price of RECs is determined by market demand, and contained between the ‘floor price’ (minimum price) and ‘forbearance price’ (maximum price) as specified by the Central Electricity Regulatory Commission (CERC).
• RPO is enforced on three categories of consumers:
  • Distribution Licensees;
  • Open Access Consumers; and
  • Captive Consumers
• The Ministry of Power, Government of India, in June 2018 has notified the long term trajectory of RPOs for solar as well as non-solar for the next three years from 2019 – 20 to 2021 – 22, reaching 21% of RPO by 2022, with solar being 10.50%.

Sales of Renewable Energy Certificates (RECs) rose over 79 % to 8.38 lakh units in March 2020 owing to good supply.

Aspirants can go through the following links relevant for the comprehensive preparation of the upcoming Civil Services Exam-

What are the Objectives of RPO?

The objectives of RPO are as follows:

1. To establish a centralized web-based monitoring mechanism for RPO compliance for all states and Union territories
2. To carry out a smooth process of monitoring renewable energy transactions of the enlisted organizations.
3. To develop a database that would become a tool for SERCs to audit RPO compliance
4. To enhance transparency in the effective compliance of RPO process

Why was REC Introduced?

Renewable Energy certificate was introduced to resolve the issues related to an imbalance of available RE resources and the entities’ requirements. This certificate facilitates effective compliance with a renewable purchase obligation.

Challenges Ahead

• Although the SERCs’ regulations have provisions of penalty for non-compliance RPO, the compliance level of the Distribution Licensees are very low.
• Further, very few SERCs have issued orders related to compliance with RPOs, and even those that have done so have allowed the RPO to be carried forward to subsequent years.

Way Forward

• Presently, the information on RE purchase is available at different platforms and there is no uniform reporting framework.
• It, therefore, becomes necessary to introduce a monitoring and feedback mechanism to assess the RPO compliance for effectively pursuing with the States and UTs.
• This data is significant for monitoring the compliance and settlement status of all the obligated entities.
• It could further improve the Renewable Energy Certificates (RECs) market and thereby help in charting out implementation strategies for the future of RE in India.

The above details would help candidates prepare for UPSC 2022.

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