Including hydropower in RPO target for states to boost grid flexibility, address variability of solar and wind energy
The draft amendment also provides for Renewable Generation Obligation (RGO) and lays down the modalities for bundling of renewable energy including hydro with thermal energy
New Delhi: The proposal by the power ministry to include hydropower within the renewable purchase obligation (RPO) targets set for the state distribution companies will provide greater flexibility to the grid, address variability of wind and solar power and ensure the optimum utilisation of hydropower in the energy mix, according to industry experts.
Renewable Purchase Obligation (RPO) makes it mandatory for a discom to purchase a certain share of power from renewable energy sources. The ministry, in Draft Electricity (Amendment) Bill 2020, has proposed to expand the scope of RPOs to include energy generated from hydro-power sources.
“The central government after consultation with the state governments, as may be considered necessary, prepare a National Renewable Energy Policy and prescribe a minimum percentage of purchase of electricity from renewable and hydro sources of energy,” the draft amendment said.
Experts say the move was long overdue for diversification of renewable portfolio in the energy mix. “We need to continuously expand the hydropower portfolio. Lately, we have not been able to give enough push to hydropower for multiple reasons; one being that water and water power are state subjects,” said Anil Razdan, a former secretary with the Ministry of Power.
Describing the inclusion of hydropower in the RPO as a positive development, he said the country needs pumped hydro storage technology to further expand the scope of hydropower and for good balancing.
According to Anish De, National Head-Energy & Natural Resources at consultancy firm KPMG India, it is a positive move as hydropower is essential in the system for managing variability of the wind and solar power. “One of the biggest challenges in hydropower is the higher per unit costs but now since it has been made an obligation we can expect expedited contract execution which earlier was not the case due to higher procurement costs,” De said.
The share of hydropower generation in the country’s energy mix has come down from 14.66 per cent in 2012-2013 to around 10.80 per cent in 2018-2019, according to the data available at Central Electricity Authority (CEA) website.
“We earlier had provisions of regulatory determination of tariffs for hydro in the National Tariff Policy, which expired long back and we have had a policy vacuum since then. Discoms have no clarity on how to procure from hydro sources,” Shubhranshu Patnaik, Partner at Deloitte India said. “The need for hydropower in balancing renewables is widely proven and the government also knows that hydropower needs to be exploited at the earliest,” he added.
The government had last year approved a slew of measures including providing renewable energy status for large hydel projects and new funding provisions for them. Earlier hydro projects up to 25 MW capacity only were considered as renewables and were eligible for various incentives like financial assistance and cheaper credit. With the government’s announcement last year, hydro projects above 25 MW can also avail these benefits.
Speaking on the RPO trajectories of different states in India, Patnaik said that the performance of states have been a mixed bag. Some states like Tamil Nadu, Karnataka, Rajasthan, Gujarat have done well and infact have exceeded targets, for others the challenges are more fundamentally rooted in the lack of financial viability of discoms.
The draft amendment also provides for Renewable Generation Obligation (RGO) and lays down the modalities for bundling of renewable energy including hydro with thermal energy. Under RGOs, conventional plants will also produce a share of their generation from renewable energy source.
A sub-section has been added in the draft amendment to address the non-compliance of renewable and hydropower purchase obligations. The penalty proposed is Rs 0.50 paise per kilowatt-hour (kwh) for the shortfall in purchase in the first year of default, Rs 1 per kwh for the shortfall in purchase in the second successive year of default and if the shortfall in purchase continues, the penalty will be charged at the rate of Rs 2/kwh for the shortfall in purchase continuing even after the second year.