In exercise of the powers conferred under the Energy Conservation Act, 2001, the Government has specified the minimum share of consumption of non-fossil sources (renewable energy) by designated entities to the extent of consumption of electricity as a percentage of their total share of energy consumption indicated in the Table below. The estimated YoY capacity addition and RE required is also shown along-with the RPO:
|
Year |
Wind |
Hydro |
DRE |
Other RES |
Total RPO |
Total Electricity (TWhr) CAGR @5% |
Total RE Required as per RPO (TWhr) |
YoY RE Increase (TWhr) |
Approx. YoY Capacity increase (GW) CUF 22% |
|
2023-24 Actual |
|
|
|
|
23.73% |
1738 |
412 |
|
|
|
2024-25 |
0.67% |
0.38% |
1.5% |
27.35% |
29.91% |
1825 |
545 |
133 |
69 |
|
2025-26 |
1.45% |
1.22% |
2.1% |
28.24% |
33.01% |
1916 |
632 |
87 |
45 |
|
2026-27 |
1.97% |
1.34% |
2.7% |
29.94% |
35.95% |
2012 |
723 |
91 |
47 |
|
2027-28 |
2.45% |
1.42% |
3.3% |
31.64% |
38.81% |
2112 |
820 |
97 |
50 |
|
2028-29 |
2.95% |
1.42% |
3.9% |
33.1% |
41.36% |
2218 |
917 |
97 |
50 |
|
2029-30 |
3.48% |
1.33% |
4.5% |
34.02% |
43.33% |
2330 |
1010 |
93 |
48 |
These Renewable Purchase Obligations (RPO)
targets set ambitious goals for the integration of renewable energy into the
national grid. While the intention behind these targets is commendable, aiming
to reduce reliance on fossil fuels and promote sustainable energy, the
feasibility and consequences of these targets deserve a critical examination.
This analysis highlights the potential pitfalls of the steep RPO targets,
focusing on the unrealistic nature of these goals, the promotion of outdated
technologies, and the resulting economic implications.
Ambitious or Arbitrary?
Earlier, the Renewable Purchase Obligations
(RPO) were notified by the Ministry of Power (MoP) as part of the Tariff Policy
2016 under the Electricity Act, 2003, and were frequently amended, with the
latest amendment on 22 July 2022. Since the Tariff Policy serves only as
guiding principles and is not mandatory, compliance has been limited.
Additionally, amending the Electricity Act, 2003 has been challenging because
it falls under the concurrent list of the Constitution. Consequently, the
central government opted to address this issue through the Rules under Energy
Conservation Act making it with in legislative domain of central government and
punishable
The current RPO targets outline escalating
obligations for various renewable sources from 2024-25 to 2029-30. For
instance, the total renewable purchase target increases from 29.91% in 2024-25
to a staggering 43.33% by 2029-30. While these targets are ambitious, they are
increasingly unrealistic when considering the current capacity and generation
data for 2023-24.
According to CEA data for 2023-24, the
total installed capacity is 442,853 MW, with a generation of around 1,738 TWhr.
Renewable sources, including wind, solar, hydro, and biomass, contribute 412 TWhr
or 23.73% of the total generation. Achieving an increase of nearly 20% in
renewable generation within six years requires substantial capacity addition,
technological advancements, and significant investments in transmission and
grid management, all of which pose substantial challenges. This target must
also be considered alongside an expected annual electricity demand growth of at
least 5%.
The RPO targets for wind are set at a
modest 0.67% for 2024-25, rising to just 3.48% by 2029-30 for wind plants
installed after March 31, 2024. To achieve 81 TWhr of renewable generation from
wind out of a total projected generation of 2,330 TWhr by 2029-30 (assuming a
5% electricity growth rate), only 42 GW of new wind generation capacity (13.5%
of total new capacity after 2024) needs to be added, compared to the required wind capacity of around100 GW by 2029-30 as per CEA optimal generation mix (table below). The relatively modest wind energy targets, especially when
offshore wind projects are yet to be tapped, reflect some arbitrariness and
raise questions about the overall strategy.
On the other hand, the trajectory for other
renewable energy sources, (which as a base line includes all existing solar, wind,
hydro and biomass generation) contributed around 412 TWhr or 23.73%% in
2023-24, is proposed to increase from 27.35% in 2024 to 34% by 2030. This gives
more space primarily to solar. In quantitative terms, solar generation capacity
must rise from the current 82 GW in 23-24 to around 292 GW by 2029-30. This
significant preference for solar over wind power raises questions about the overall
strategy and coherence of the RPO targets. It is noteworthy that the load of
discoms is different from each other and those serving higher share of domestic
consumers have their peak demand during non-solar hours and may not be in
position to absorb high share of solar.
This is corroborated by POSOCO data, which
analyzed the contributions of various sources to solar and non-solar peaks each
month from 2019 to 2022. During non-solar winter peaks, renewables (solar and
wind) contributed only around 2.08%, hydro around 14%, and thermal power nearly
80%. In contrast, during the solar summer peak, solar contributed around 10%,
wind around 7%, and hydro around 16%.
CEA's optimal generation capacities mix for 2029-30
Unfair to Discoms
The RPO trajectory is unfair to the
discoms, especially given the current inadequacy in renewable generation. With total
renewable generation at only 23.7% in 2023-24 and an RPO target of 29.91% for
2024-25, achieving an additional 6.2% or 133 TWhr in a single year is simply
not feasible. This would require around 69 GW of new solar, wind and other
renewable capacity in one year i.e., 2024-25.
It is important to note that generation is
a delicensed business, and investments occur only if there is sufficient demand
or if Power Purchase Agreements (PPAs) are secured. Without adequate renewable
generation capacity, expecting discoms to meet their renewable purchase obligations
is unrealistic and places undue pressure on them.
Front Loading of Renewables deprives of future
Technological advancements
A notable concern with the current steeper
RPO targets is the emphasis on front-loading renewable energy, particularly
solar. While solar energy is a crucial component of a sustainable energy mix,
the rapid pace of technological advancement means that the currently deployed
technology quickly becomes obsolete. Front-loading investments into these older
technologies can result in stranded assets, where the infrastructure becomes
outdated before it has reached its full economic potential.
Further, the push for distributed renewable
energy projects, including small-scale solar installations, while beneficial in
specific contexts, may not always be the most efficient or cost-effective
solution. The targets do not adequately consider advancements in grid
management technologies, which could offer more sustainable and economically
viable solutions in the long term. This approach reflects governance bias
driven by quotas rather than grounded in engineering or economic principles,
making it more of a political tool than a well-thought-out strategy.
Economic Implications and Price
Volatility
The aggressive push towards renewable
energy mandated by the RPOs has significant economic implications, particularly
for thermal generation assets. During solar hours, the influx of solar power
can lead to the under-utilization of thermal plants, which must operate at
lower Plant Load Factors (PLF) or technical minimum levels. This increases
their O&M costs and results in stranded generation assets. This mismatch
not only impacts the financial viability of these plants but also creates a
supply-demand imbalance in the power market.
During non-solar peak hours, the reduced
availability of renewable energy can cause prices to skyrocket in power
exchanges. This volatility can lead to higher costs for consumers and
instability in the energy market. This imbalance is evident in the current
fluctuations in power exchanges, where peak demand of around 250 GW is met with
lower Day-Ahead Market (DAM) prices during solar hours, but prices hit the cap
during non-solar hours. The intermittent nature of renewable energy sources
necessitates robust backup from conventional sources, which the current RPO
framework does not adequately address.
Beyond Nationally Determined
Contribution (NDC)
India has committed to achieving
approximately 40% of its cumulative electric power installed capacity from
non-fossil fuel-based energy resources by 2030 under UNFCC. However, given the low-capacity
utilization factors of solar and wind energy in India, which are around 20% and
24% respectively, the Renewable Purchase Obligation (RPO) of 43.3% by 2030 translates
into about 65% of the total installed capacity of 2030. This high share of renewable
capacity is an unfair burden could potentially delay economic growth, as it may
lead to staggered increases in per capita energy consumption.
Conclusion
While the Renewable Purchase Obligations aim
to drive the country towards a greener future, the current targets appear to be
overly ambitious and potentially counterproductive. The promotion of obsolete
solar technologies, the risk of stranding thermal assets, and the economic
volatility in the power market are significant concerns that need to be
addressed. A more balanced and realistic approach, incorporating advancements
in energy storage and grid management, along with a gradual transition to newer
renewable technologies, would be more effective in achieving sustainable and
economically viable energy goals.
The focus should shift towards creating a flexible
and resilient energy infrastructure that can accommodate the rapid advancements
in renewable technologies while ensuring economic stability and reliability of
power supply. Only through such a balanced approach can India achieve its
long-term energy sustainability goals without compromising economic growth and
stability.