Quotas/Renewable Portfolio Obligation

Renewable Portfolio Obligation (RPO) is one of the means to promote the accelerated development of power generation from non- conventional sources. The Electricity Act 2003 provides that co- generation and generation of electricity for renewable sources would be promoted by the SERCs by specifying, for purchase of electricity for such sources, a percentage of the total consumption of electricity in the area of a distribution

• In the absence of any mandatory provision, it would have been difficult to encourage development and deployment of RE technologies in the country. The intent of this explicit proviso is to promote RE by making it obligatory on part of licensee(s)/retail supplier(s) to buy a certain fixed percentage of their annual requirement (as a percentage of energy sales) from renewable energy.

Often, RPO is fixed as a certain percentage of sales within the states. In some cases, this percentage is applied on energy supply mix. Specified RPO vary across the states and are often based on RE potential available in States and its impacts on retail tariff. Some states have even fixed technology specific targets for renewable energy.

Proper assessment of renewable energy potential within the state. Criteria for fixing the RPO (state or national level). Impact on retail tariffs. Evaluating options for fulfilling RPO e.g. through investments in renewable energy, purchasing RECs etc. Provision of Open Access (OA) could facilitate meeting the RPO targets in states that don't have adequate renewable energy potential. However, OA itself has not been very successful in implementation due to infrastructure bottlenecks and OA charges that make this somewhat economically unattractive. Currently inter-State renewable energy transactions are subjected to the inter-State open access regulations. Renewable energy transactions are subjected to OA charges as well as balancing market costs in a manner similar to conventional generation. Further, renewable energy generators are required to give schedules just like any other generator. As a result, the costs associated with open access transaction (whether intra-state or inter-state) involving RE are significantly higher than that for conventional generator of the same size.

In the context of direction set by Electricity Act and the policies, number of State Electricity Regulatory Commissions (SERCs) has specified the Renewable Purchase Obligations (RPO) for their licensee distribution companies both renewable energy as a whole or technology-wise. The RPO mechanism is helping in harnessing the renewable energy potential by creating the demand and facilitating the market.