Higher Penalties for Missing RPOs - A Step in Right Direction, says Infomerics

The government’s step to impose higher penalties on failure to adhere to the minimum Renewable Purchase Obligation (RPO) target is a step in the right direction as the increase in penalties for non-compliance of RPOs will force the power Distribution Companies (DISCOMs) to take necessary steps to meet annual RPO obligations else pay heavy penalties, says Infomerics Ratings.
 
This will be a strong deterrent considering their stressed finances. Strict RPO enforcement will ensure a positive trajectory in achieving the country’s Renewable Energy (RE) target of 500 GW by 2030.
 
The Electricity Amendment Bill 2022 has proposed RPO for a state should not be below the minimum percentage prescribed by the central government. Failure to adhere to the minimum RPO target would lead to higher penalties.
 
Also, SERCs can specify the minimum RPO above the central government laid RPO target but the minimum for a state cannot be below that. For the states that do not adhere to the target, the penalty sum is to be calculated between twenty-five paise and thirty-five paise per kwh for the shortfall in purchase in the first year of default and between thirty-five paise and fifty paise per kwh for the shortfall in the subsequent years.
 
 
Enforcement of the proposed RPO trajectory by the states is critical to achieve India’s RE vision. However, many factors ail capacity addition in India’s RE sector. India has largely been import-dependent when it comes to solar modules, batteries for power storage and for manufacturing other renewable energy systems. This is despite imposition of safeguard duty from July 2018, said Infomerics.
 
With the government’s policy shift towards ‘Aatmanirbhar’ domestic manufacturing has become primarily important. The government has introduced a 40% import duty on photovoltaic modules & 25% duty on photovoltaic cells from April 1, 2022, a move to protect domestic manufacturers from competing exports.
 
Also, solar rooftop is expected to be a laggard in achieving capacity addition target of the country. Financing of large capacity additions would require innovative financing options. Innovative concepts like solar-wind Hybrid projects, floating solar, manufacturing (module) linked projects are needed to boost the capacity addition in the RE sector. Another major problem is that the financially distressed DISCOMs are known to be delaying payments to RE generators.