The government continues to set steep targets for renewable energy usage, even though execution has been patchy. Although power distribution companies (discoms) are yet to meet all the FY17-FY19 renewable energy usage targets, the government has scaled up the targets for FY20-FY22.
From 17% in FY19, the renewable purchase obligation (RPO) target as a percentage of total electricity usage by the discoms has been ramped up to 21% by FY22. The trajectory is in line with the renewable capacity addition ambition of 175 gigawatts by FY22.
But circumstantial data suggests that compliance is lagging by a notable margin. As chart 1 shows, renewable energy generation as a percentage of total electricity production stood at 7.8% last fiscal, roughly half what the government planned to achieve. The actual compliance figures for FY18 are not available yet. Also the data captures only grid interactive renewable energy. But it broadly gives the usage trend in the country.
Anecdotal evidence suggests that states are lagging in implementation. Rating agency Icra Ltd says only six of the 29 states have stipulated RPO norms in line with the trajectory approved by the power ministry for FY19. An Icra study of FY16 RPO compliances shows that most states are lagging behind their RPO targets. “RPO compliance levels by the distribution utilities especially in states with limited renewable energy potential has not been satisfactory so far," says Girishkumar Kadam, vice president and sector head (corporate ratings) at Icra.
According to Kadam even the RPO norms notified by state electricity regulatory commissions vary and are not consistent with policy targets.
The poor implementation is a letdown for the sector that has seen huge investor interest. Even so the sector has done relatively better however overambitious the targets looks like. See chart 2.
That said the coming years may well bring integration issues to the fore. If not managed well, renewable energy adoption on a grid scale can take a hit.
Due to the sector’s relatively small size, states have managed to overcome the variability issues in generation till now. But as the sector grows, adoption in future can be a challenge unless the states realign their grids and systems to renewable energy adoption. Also renewable energy producers should be prepared to provide more certainty to their operations (such as providing generation forecasts).
Recent study papers by various expert groups show that the government is mindful of the challenges. So even as the targets look ambitious, stakeholders can take heart from the government’s thrust on renewable energy and the pace of growth of the sector.