RPO to increase to 8% in India

India’s government is thinking of increasing its solar renewable purchase obligation target from around 3% to 8%, in order to push energy consumers to increase their consumption of green energy. India has a target of generating 15% of its electricity consumption from wind, solar, biomass and small hydro power by 2020, as per its National Action Plan on Climate Change. However it hardly met even 5%, in FY 13 as per CEA. This means a substantial ramp up in renewable energy capacity is required. Not only will green energy sources have to increase their share of the total power generation, but also keep up the pace with the incremental power capacity that is coming up in India due to rapid GDP growth.

The ministry of power wants to increase the solar RPO obligations, in order to meet the solar target set by the PM. However, the vision and the implementation reality do not match up. The current RPO setup is in a mess, with most state utilities not following the mechanism and not meeting the penalties either. Most green energy producers do not rely on RPO certificates to generate cash, as the REC certificate trading has been a non-starter. The government needs to clean up its existing act before moving on to more ambitious targets.

Another proposal of forcing thermal power generators to set up large solar power capacities will not work either. The current power industry is saddled with huge debts and problems of coal procurement. Many of them such as Mundhra plant of Tata Power is running at a loss, while others are in litigation. On top of this mess, you want to add more costs to thermal power generators. This will only prevent companies from setting up new thermal power generation capacities as well.

India has good targets and a good vision, however the ground reality is far removed from these targets. Most people think that 100 GW will not be achieved, given the pathetic situation of the economy and the structural barriers. Even meeting 50% of the target will be good. Putting more regulations and laws onto private businesses will not help but drive them away. Instead of forcing businesses, government needs to come up with innovative ideas to help build capacity.