Initially, RPO focussed on a broad solar and non-solar classification; now, it includes hydroelectricity, waste to energy, and distributed renewable energy. The obligation applies to discoms, open-access power purchases, and captive power consumers. Further, the obligation has been stated individually for all sources; for instance, by 2029-30, the RPO must reach 3.48% for wind, 1.33% for hydro, 4.5% for distributed renewable energy and about 34% for other sources (primarily solar). The bulk consumer would have the liberty to make good the shortfall in one category by overachieving in another though this fungibility is unavailable for distributed renewable energy.

The concept has been prevalent in other countries. Introduced in 2002 and continued till 2017 in the UK, this was held to be extremely successful there as the proportion of renewable power generation went up from 3.5% (in 2006) to almost 41% (in 2020). In contrast, RPOs have not really been successful in India since they were never enforced by the SERCs despite them fixing the obligation. Compliance across states/Union territories shows great variance, from 0.2% (Lakshadweep) to 88% (Sikkim).

Though the Union government notified RPO figures for designated consumers, the SERCs stipulated much more lenient obligations; between states, there is a lot of variation too. There are several differences in how states are arriving at their RPOs, including differences in categorisation. To illustrate, there are differences in the cut-off dates for wind generators whose output would be used in the calculation of RPOs, implying that figures can’t be compared across states. Then, what is included in estimating compliance is also different. For instance, some states include solar roof-top generation whereas others do not. Further, some states calculate their RPO after subtracting their hydro consumption from total electricity consumption whereas others do not. Some states have determined their RPO targets as composite figures instead of giving individual targets for different renewable sources. And, some states allow a carry forward of the surplus/deficit compliance to the next year while some only allow the deficit to be carried forward. These are only a few of the differences and do not make an exhaustive list.

Two major issues merit mention in the RPO conversation. One, we have probably gone for overkill by setting ~33.5% as the RPO target for solar by 2029-30. With a projected demand of 2,279 billion units (BUs) by 2029-30, a 33.5% share works out to 763 BUs. One needs an installed capacity of about 400 GW to generate 763 BUs of solar power. Given we have only ~97 GW (December 2024) of installed solar capacity, we are unlikely to reach the target. So, we will very likely miss our solar RPO target, not because the designated consumers are unwilling to buy but because the required capacity will very likely not be available. The situation is much the same today; read against the target for 2024-25, the installed solar capacity is far lower than what is required. In such a situation, how can designated consumers be levied a penalty for failing RPO compliance? Also, when penalties are imposed for non-compliance, it surely can’t be included in the aggregate revenue requirement, given doing so will mean that the penalty amount would be recovered through retail tariff. The consumers cannot be held responsible for a “failure” on the part of the management. The penalty has to be borne from the discoms’ profit, and here lies the real problem — barring a few discoms, all others are in the deep red and, therefore, if they pay for the penalties, their losses will only grow.

Ensuring compliance with RPO targets is difficult given the circumstances. Instead of trying to bolster demand artificially for renewable generation (by stipulating RPOs), perhaps a better way is to pay more attention to supply-side bottlenecks. Let us be alive to the fact that artificially increasing demand will not work if supply is constrained. Removal of basic customs duties on cells/modules, revoking the approved list of models and manufacturers ALMM), ensuring timely payment to renewable generators, assisting the developers in land acquisition and getting quick grid connectivity are some possible solutions that need attention.

Somit Dasgupta is senior visiting fellow, Icrier.The views expressed are personal