RENEWABLE PURCHASE OBLIGATIONS (RPOs)

TOPIC: Environment

Context- Row between Centre and Telangana govt over renewable energy procurement.

Telangana has been particularly vocal about the “increasing burden” forced upon states by the Centre on account of the clean energy cess imposed on coal and the RPOs (Renewable Purchase Obligation).

Concept-

Renewable Purchase Obligation:

Under RPO, power distribution companies purchase a certain percentage of their requirements from renewable energy sources.
Renewable purchase obligations set targets for states for both solar and non-solar energy procurement as part of their RPO.
Under Renewable Purchase Obligation (RPO) bulk purchasers like discoms, open access consumers and capacitive users are required to buy a certain proportion of RECs(Renewable Energy Certificates). They can buy RECs from renewable energy producers.
- Renewable Energy Certificates (RECs) is a market-based instrument to promote renewable sources of energy and development of the market in electricity.
- One REC is created when one megawatt hour of electricity is generated from an eligible renewable energy source.
RPO was instituted in 2011, it is a mandate that requires large power procurers to buy a predetermined fraction of their electricity from renewable sources.
The proportion of renewable energy for utilities is fixed by the central and state electricity regulatory commissions.
In India, RECs are traded on two power exchanges — Indian Energy Exchange (IEX) and Power Exchange of India (PXIL).
The price of RECs is determined by market demand, and contained between the ‘floor price’ (minimum price) and ‘forbearance price’ (maximum price) specified by the Central Electricity Regulatory Commission (CERC).