The government intends to decrease the renewable generation obligation for new power plants from 40% to 6-10% – EQ

In Short : The government is planning to reduce the renewable generation obligation for new power plants from 40% to 6-10%. This policy shift aims to balance the transition to renewable energy while considering the existing energy infrastructure. By easing the renewable generation requirement, the government hopes to encourage new power plant investments while still promoting sustainable energy sources, ensuring a gradual and sustainable shift toward cleaner technologies.

In Detail : Coal-fired power plants have been significant in powering the country during non-solar hours when renewable energy is not available in the absence of energy storage systems

In a major reversal of its previous order, the Union government has now proposed to impose a Renewable Generation Obligation (RGO) of 6-10 percent on new coal and lignite power plants, instead of 40 percent as was notified in March.

Section 14 of the Energy Conservation Act, 2001, allows the centre to mandate electricity generating companies to produce or procure a minimum specified quantity of power from renewable energy sources. Such a mandate is called an RGO.

In the latest draft notification, issued by the Ministry of Power on October 6, the government has proposed to keep the RGO mandate at 6 percent if the coal/lignite-based power plant was commissioned on or before March 31, 2023, even though the due date for RGO compliance starts from April 1, 2026. Plants which has a commercial operation date between April 1, 2023, and March 31, 2025, will have an RPO mandate of 10 percent, the due date for which will be April 1, 2025. Plants scheduled for commissioning from April 1, 2025, onwards will also have a mandate of 10 percent, which will have to start from the day of commercial operations.

Power generating stations will have to submit electronic reports detailing their electricity generation, including renewable energy production or procurement for each financial year to the power ministry. In case of non-compliance, penalties will be imposed as per the Energy Conservation Act 2001, which is likely to be around Rs 10 lakh for each instance of non-compliance with additional daily penalties for continued violations.

This draft notification has been made public to seek comments for 15 days after which it will be passed as a formal mandate, the document stated.

On March 6, the government through a notification mandated all upcoming coal-based power plants to source 40 percent of their capacity from renewable energy.

A draft of the RGO mandate was first released by the government in 2016, and it was after seven years that the rule was notified, only to be revised again in October this year.

Senior officials in the Ministry of Power said the decision has been taken in view of the unprecedented surge in power demand in the country. “The pace of growth of renewable energy capacity is not commensurate with the growth in power demand. Coal-fired power plants have been significant in powering the country during non-solar hours when renewable energy is not available. India’s night-time or non-solar power demand is also clocking new highs. In the absence of energy storage, coal-fired plants help in meeting the demand,” a senior power ministry official said.

The government had projected a peak power demand of 230 gigawatts (GW) in the fiscal year 2023-24, however, in reality, power demand soared to an unprecedented 240 GW with a peak deficit of 10.74 GW.

For 2024-25, the government is anticipating a peak demand of 256.53 GW. Overall, the country’s power demand is expected to increase at a compound annual growth rate (CAGR) of about 6 percent, according to the Central Electricity Authority (CEA).

As per the latest draft notification, renewable energy sources shall mean hydro, wind and solar, including its integration with combined cycle, biomass, biofuel cogeneration, urban or municipal waste and such other sources as recognised or approved by the Union government.

It also offers flexibility to power generators, allowing them to fulfil their obligations either by establishing the necessary renewable energy capacity procuring and supplying renewable energy or independently selling renewable power.

Additionally, captive coal or lignite-based power stations will be exempted from RGO compliance if they meet their renewable energy consumption obligations, the draft stated.

The government has also proposed to allow generating companies operating multiple coal or lignite-based power plants to meet RGO targets on an aggregate basis. “Any obligations met under the ‘Program for Flexibility in Generation and Scheduling of Thermal/Hydro Power Stations through bundling with Renewable Energy and Storage Power, 2022’ will contribute to RGO fulfilment,” it stated.

India has also set an ambitious target of generating at least 500 GW from renewable energy sources by 2030 (up from 171 GW now) and going net zero by 2070.