MOP approved RPO: A hearty development for RE sector

The Ministry of Power recently notified the long-term growth trajectory of Renewable Purchase Obligation (RPO) to be adopted by all the states and union territories for the three-year period from FY2020 to FY2022. The trajectory has been notified in line with the renewable capacity target of 175 GW by FY2022. The overall RPO target is set to increase from 17 per cent in FY2019 to 21 per cent in FY2022 and is a positive development for the renewable energy sector. The Ministry had last notified the RPO trajectory in July 2016, for the three-year period from FY2017-19.

Commenting on the development, Sabyasachi Majumdar, Senior Vice President & Group Head, ICRA Ltd says, “The notification of long-term RPO trajectory provides visibility for growth of renewable energy-based (RE) generation capacity and is a beneficial move. However, the timely adoption of these targets by the state electricity regulatory commissions (SERCs) remains the key. This is given that only six out of the 29 states have stipulated RPO norms in line with the trajectory approved by Ministry of Power for FY2019. In this context, the implementation of the draft amendments to the National Tariff Policy remains crucial as it includes a provision requiring SERCs to adopt the RPO trajectory issued by the central government.”

As per ICRA, the RPO levels continue to vary across the states in terms of both, quantum of RPO and the period of RPO trajectory approved by the SERCs, with only 23 out of the 29 states stipulating RPO for FY2019 and only 10 states stipulating RPO trajectory till FY2022. Also, the RPO level remain lower than the trajectory stipulated by Ministry of Power in most of the states.

While the extent of RPO compliance at all India level has improved in the recent years with the significant addition of wind and solar power capacities, it continues to remain less than 100 per cent. Moreover, the compliance level varies across the states, with the states having high wind and solar generation potential reporting higher compliance to RPO norms. Along with adoption of the RPO trajectory approved by the Ministry of Power, the SERCs must enforce the compliance to these norms by the obligation entities including state distribution utilities, captive power consumers and open access consumers.

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