Renewable energy generation obligations crucial

A recent resolution by the Indian Ministry of Power (MoP) has introduced a new concept of ‘Renewable Generation Obligation (RGO)’ for power producers.

Any upcoming coal or lignite-based commercial thermal power plant will have to produce a portion of its total energy from renewable sources. According to the new RGO mandate, the upcoming thermal power plants will have to produce a minimum of 40% of the total power generated at their power plant through renewable sources. They will, however, have the liberty to generate the renewable energy (RE) either on their own or ensure the supply by procuring from other source, as reported by Mongabay-India.

Power plants which will start their commercial operations anytime between April 1, 2023, to March 31, 2025, have to ensure compliance with the new RGO norms by the end of April 1, 2025. New thermal power plants coming into operation after April 1, 2025, have to comply with the RGO as they begin their operations. Captive thermal power plants, however, have been kept out of the ambit of the RGO. Captive power plants are non-commercial plants maintained to cater to the demands of their use, according to the Mongabay-India report. The report also states that 0ut of the several public sector and private coal companies in India, there are selected entities that produce thermal power and renewable energy. The National Thermal Power Corporation of India (NTPC) is one of the state-owned thermal power companies which produces coal-fired thermal power and renewable energy. It already has 3.1 gigawatt (GW) of installed RE capacity while it is installing 4.7 GW of more clean energy. Some selected private thermal power plants, too, have forayed into the RE sector.

As per a Down to Earth (DTE) report, in order to meet the mandate, coal power plants may either produce renewable energy within their own premises or enter into agreements with other entities to procure and supply an equivalent amount of renewable energy. The notification came in pursuance of the National Tariff Policy, 2016, which mandated electricity generating companies to establish renewable energy generating capacity as directed by the central government, or procure and supply renewable energy equivalent to such capacity.

The DTE report points out that the tariff policy also provides for the bundling of renewable energy by these generators with thermal energy for the sale of power to electricity distributors. All the electricity distribution licensees are obliged to purchase a minimum specified quantity of their requirements from renewable energy sources under the Electricity Act of 2003. Hence, the entities buying power from such stations covered under the recent notification shall be considered by the state regulatory authorities to have met the Renewable Purchase Obligation to the extent of power bought from such renewable energy generating stations. In another one of its notifications released May 26, 2022, the Union Ministry of Power provided for “flexibility in generation and scheduling of thermal / hydro power stations through bundling with renewable energy and storage power”. The notification identified 81 coal power plants to replace 58,000 million units of energy from coal with renewable energy generation by 2025-26. The scheme was said to conserve 34.7 million tonnes of coal and reduce carbon emissions by 60.2 million tonnes.

The Mongabay-India report adds that energy experts welcomed the move and claimed that it could help harness more clean energy and aid in achieving India’s Nationally Determined Goals (NDCs). According to the latest NDC of India, the country aims to ensure 50 percent of its total energy comes from non-fossil fuel sources by the end of 2030 while it plans to go net-zero by the end of 2070. However, experts also claim that there is still a lack of clarity on what will happen in case of non-compliance of RGOs by the obligated thermal power plants and batted for more clarity on other aspects of RGO too, the Mongabay-India report states.

The report quotes a 2022 study by the International Renewable Energy Agency (IRENA), which says that if the cost of energy generation from coal-fired power plants and RE sources is compared, generating power from RE sources is four times cheaper from coal-fired power plants. The report said that in 2022, while around $127 was needed to produce 1 Megawatt-hour (MwH) of power from coal plants, it was around $30-$35/MwH for the energy produced from solar or onshore wind power projects if the fuel cost is compared.