India is a fast growing economy that is heavily dependent on energy. From agriculture to transportation, a diverse range of industries rely on different forms of energy for their growth and sustenance. Even in our simple day-to-day lives, we rely on energy right from switching on our geysers for hot water in the morning to catching up with the world before switching off our smartphones at night. But rarely do we stop to question its source, or think about the policies that control it.
To fuel our energy needs, India generates about 330 Gigawatts (GW) of electricity from renewable and non-renewable sources - 221GW or 67% is generated through thermal sources, like coal, gas and oil, and the renewable sources contribute 57 GW or 17.4%. For 2022, the country is ambitious to generate 175GW of electricity with only renewable sources - 100GW from solar, 60GW for wind, and the rest through small hydro-projects and biomass power. Given this goal, are we chasing it well enough on the ground? Does the adoption of a low carbon based electricity supply system mean low cost as well? In a new study, scientists from the Indian Institute of Science (IISc), Bengaluru have tried to answer these questions. The study, published in the Energy Policy journal has looked into the role of targeted policies in mainstreaming renewable energy, especially in a resource constrained electricity system of Karnataka.
Today, targeted policies such as Feed-in Tariff (FIT), Renewable Purchase Obligation (RPO) and Renewable Energy Certificate (REC) are introduced to stimulate renewable energy capacity expansions as well as generation. FIT is a policy where payments are made to ordinary energy users for the renewable electricity they generate based on the renewable energy source. The RPO policy mandates a certain portion of the electricity generation to be done using renewable energy. In cases that cannot comply with RPO generation, entities can purchase Renewable Energy Certificates (REC) representing the electricity purchased from renewable sources by other entities.
While these policies are in place to push for ‘green’ energy, the researchers of the study observed that the Indian power utilities treat RPO targets as a cost-burden, and hence are non-compliant with them. “From my short meetings with one of the authorities at a state electricity distribution company, I found them to be under the impression that RPOs are a cost burden for a cash strapped electric utility”, says Amrutha Amarnath, a lead researcher in the study.
Most electric utilities face resource (energy or ﬁnancial) constraints in integrating renewable energy in a conventional energy system, thus making RPO targets a cost-burden. The researchers also noted that policies like FIT and REC, in their present form, have failed to increase renewable electricity supply. They observed that though there are power purchase agreements made by the power utilities to buy renewable energy through FIT, the quantum of electricity supplied from renewable sources is not yet on par with renewable energy capacity or the available potential.
Taking Karnataka as a case study, the researchers analyzed real-life scenarios and derived economic means of procuring renewable electricity, which will help the power utilities to comply with RPO, buy renewable electricity through preferential tariffs and actively participate in REC trading. They used an earlier developed programming model to perform empirical analysis of impact of RPO/REC policies in the context of Karnataka electricity system.
“A combination of command-and-control policy instrument like RPO and market-based policy mechanism like REC surely has a great potential in ramping up renewable energy consumption in India. Along with this combination, any amendment in incentivizing surplus renewable electricity procurement by policy makers at Central Electricity Regulatory Commission (CERC) is also a timely requirement to streamline distribution companies to depend more on renewable energy”, remarks Amrutha.
The researchers suggest that electric utilities should arrive at the right supply portfolio based on cost, available capacity and generation potential of existing hydro-thermal and promising renewable sources, to meet the ever-growing demand. The existing policies, the researchers find, are inadequate. They stress the need for market-based incentives to achieve the objectives of expanding energy access, meeting international agreements on climate change (emission standards) and ensuring energy security. “Presently, targeted policies broaden the perspective of ramping up efforts to procure and invest in renewable options. An increasing demand on RECs is an indicator in renewable energy consumption to meet RPO target and this is a good sign towards a sustainable pathway”, says Ms. Amarnath.
“Major stakeholders affected by such policy interventions in this study are electricity distribution companies (such as BESCOM, MESCOM, TNEB, etc). It is high time that they strictly adhere to RPO targets set at the state level as they impact the national target of 175GW by the year 2022”, says Ms. Amarnath, adding that these utilities must set RPO targets increasingly and strictly adhere to the same. Are the policy makers listening?