UPERC decision on RPO can give Odisha’s energy-intensive industries a fresh lease of life


Bhubaneswar: India has set a target of 175 GW of renewable energy by 2022, and has implemented several policies to create an ecosystem of demand for power generated from renewable sources in the economy. One such measure is mandatory purchase of renewable energy by all consumers under the RPO regulations of the state.

The RPO (Renewable Purchase Obligation) mechanism, which was ushered in 2010 to promote renewable energy, needs serious re-evaluation, especially for states like Odisha which do not have adequate renewable energy. Moreover, with the cost of RE generation dropping to as low as Rs. 2.45 per unit – also known as grid parity – the continuing burden on consumers to support RE producers is a moot point.

The responsibility to comply with the RPO regulation also puts strain on the manufacturing and heavy industries in the state which are generating employment for lakhs of people. A case in point is the energy-intensive industry such as aluminium which gives direct employment to 30,000 and indirect employment to 4 lakh downstream industry employees. Currently, the industry is struggling to comply with these norms. The aluminium industry needs uninterrupted power while solar or wind power capability is intermittent at best as they depend on weather conditions. Yet the heavy industry in the state is supposed to purchase RE paper certificates which has increased the power cost by another 10-15%, i.e. around $60/ton – $100 /ton, making the industry unviable.

In Odisha, the state electricity regulatory commission has been increasing renewable energy obligation by 1.5% – 3% annually over the last three years. For FY19-20, the obligation for energy-intensive industries in the sector is 11%. It is expected that by FY21-22, in keeping with the Power Minister’s mandate, obligation for these industries will be at 21%. Renewable Energy generation varies as per the sunshine intensity (insolation) and wind speeds in the terrain. Odisha is not endowed with one of the best RE generation conditions unlike Rajasthan, Tamil Nadu, Karnataka etc. and its industry has to depend on purchase of Renewable Energy certificates from other state Gencos.”

The RPO regulation has cast an insupportable burden on the energy-intensive industries. Due to a general dearth of renewable supply in the system, the system is facing a shortfall of 40 GW. Moreover, of the 80 GW of installed renewable capacity, 75 GW is already tied up, leaving a meagre 5 GW left for uptake. Additionally, the energy-intensive industries that have set up their own CPPs are left with stranded capacity when compelled to buy power from renewable sources, currently in the tune of 30 GW.

The supply shortage has also led to an increase in the prices of Renewable Energy Certificates (REC) to Rs 2 (for solar) and Rs 1.6 (for non-solar) from Re 1. In the renewable-deficit states, specifically, industries that rely on power need to purchase RECs to meet RPO norms. At the same time, sale of RECs have dropped significantly due to lower supply.

The Central Government and Niti Aayog have realised the burden being put on manufacturing industry due to RPO. In fact, the government, in February 2019, clarified that RPO burden should be capped for industries having captive plants as per their date of commissioning.

Here, it is important to mention that some states are already realising this and the recent move of the UPERC ( Uttar Pradesh Electricity Regulatory Commission), which has notified an amendment that has kept the RPO for CPPs fixed at FY2010-11 levels and consequently negated any sort of incremental changes, has set a precedent that, if the state electricity regulator of Odisha endorses, can improve the conditions of the existing industries and help them adequately contribute to the economic growth of the state.

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