Maharashtra Electricity Regulatory Commission (MERC) has rejected a plea for a 50% renewable energy obligation (RPO) procurement mandate from projects within Maharashtra.

Such an imposition was against the Electricity Act 2003’s mandate to promote competition, and that such restrictions on distribution licensees alone would be discriminatory, the Commission said.

Background

Maharashtra Energy Development Agency (MEDA) had sought directions for distribution licensees to meet 50% of the total RPO requirement by purchasing energy from renewable sources within the state as per the state’s Renewable Energy Generation Policy 2020.

In its petition, MEDA argued there has been a substantial cumulative shortfall in meeting RPO targets up to 2019-20.

To fulfill the 50% RPO within the state, 10,250 MW and 12,100 MW capacities are required for FY 2023-24 and FY 2024-25, respectively. The Agency claimed that the state has an estimated renewable energy potential of 169,010 MW as of September 2022, sufficient to meet the requirements.

MEDA asserted that mandating a 50% purchase of renewable energy within the state would not significantly affect tariffs.

It noted that once the inter-state transmission system (ISTS) waiver benefit expires, the prices for ISTS-connected projects might witness a surge.

It argued that specifying 50% RPO within the state will attract investment, create job opportunities, generate additional revenue, and contribute to infrastructure and economic development.

The petition proposed a gradual approach to achieving the 50% RPO target within the state to accommodate the time required for contracting, project commissioning, and addressing potential delays.

Stakeholder responses

Eon Kharadi Infrastructure (EON) said it was in discussions to procure renewable energy and e-practices, aiming to include a condition in future tenders requiring 50% RPO from Maharashtra.

The State Transmission Utility said it had drawn attention to Maharashtra’s negative Available Transfer Capability (ATC) margin. It had planned eight transmission network strengthening programs, which are anticipated to increase ATC by 3,622 MW.

The state’s transport corporation, BEST Undertaking, said it had secured agreements for wind-solar hybrid power and solar power, which is expected to fulfill 98% of the RPO in FY 2025-26 through Solar Energy Corporation of India (SECI), with only 2.64% sourced from within the state.

It noted that distribution licensees are obligated to provide affordable electricity to consumers. Factors like transmission constraints, low solar radiation, capacity utilization factors, high land costs, and elevated interest rates should not justify imposing higher tariffs on consumers for an extended 25-year period.

Distribution licensees have the right to import more economic power from any location in the country. Currently, renewable energy project tariffs in Maharashtra are higher than in other states, so consumers in Maharashtra should be allowed access to more cost-effective power.

Mindspace Business Parks (MBPPL), Gigaplex Estate (GEPL), and KRC Infrastructure and Projects (KRCIPPL), which are in the process of planning a long-term power procurement agreement for wind-solar hybrid projects, said they were concerned about the petition and its potential impact on tender conditions.

They emphasized that if the ISTS waiver extends beyond 2025, ISTS projects will become attractive. Intra-state generators may choose to supply power to Commercial and Industrial consumers once Green Open Access regulations are announced.

Adani Electricity Mumbai – Distribution (AEML-D) asserted its right to procure renewable power from any source based on competitive bidding.

Maharashtra State Electricity Distribution Company (MSEDCL) advocated for fair and transparent procurement practices as part of its commitment to meeting RPO targets.

Indian Railways questioned the binding nature of the state government’s policy amendment and opposed the condition that RPO should be fulfilled exclusively from renewable energy sources within the state.

Nidar Utilities (NULLP), as a deemed distribution licensee with an approved power purchase agreement, supported competitive procurement without restrictions.

Tata Power Company – Distribution (TPC-D) supported MEDA’s proposal with suggestions for gradual implementation and coordination.

Maharashtra State Power Generation Company (MSPGCL) supported MEDA’’s submissions, emphasizing the need for additional provisions in RPO regulations to meet high-capacity targets.

 Commission Analysis and Rulings

The Commission acknowledged the state’s Renewable Energy Policy, 2020, with a target of adding 17,360 MW by 2027.

The policy incentivized renewable energy developers, including a 10-year electricity duty exemption for specific projects. It directed MEDA to file a petition before the commission to mandate that 50% of distribution licensees’ total RPO in Maharashtra must be met within the state.

The Commission reviewed the regulatory framework under the Electricity Act 2003 and the National Tariff Policy of 2016, emphasizing the promotion of co-generation and electricity generation from renewable sources.

While the Electricity Act promotes the procurement of renewable energy by obligated entities, it does not specify that a certain percentage of renewable energy be procured from within the state.

The Commission outlined options available to renewable energy projects for selling power, including participating in competitive bidding, adopting the REC mechanism, and engaging in generic tariff determination.

Individuals can set up generating facilities, comply with technical standards, and freely use the generated electricity for self-consumption or sell it to a distribution licensee or any other entity through open access.

Similarly, the Commission noted options were available for obligated entities/distribution licensees to fulfill RPO, including procuring renewable energy in physical form, using renewable energy certificates, or combining both.

The Commission also noted that the Green Term Ahead Market (GTAM) and Green Day Ahead Market (G-DAM) allow the purchase of green energy through power exchanges, helping obligated entities meet their RPO. As a result, DISCOMs are actively using GDAM/GTAM or competitive bidding to fulfill their RPO requirements.

The Commission emphasized the duty of distribution licensees to develop an efficient distribution system and supply electricity at economical rates.

Addressing the tariff comparison, the Commission noted MEDA’s observation that projects commissioned outside the state are competitive due to the waiver of inter-state transmission charges until June 2025.

However, it anticipates parity after that period, making intra-state projects competitive. It suggests that the government’s policy intent can be met without imposing restrictions as projects become competitive.

When entities obligated to meet RPO include captive and open-access consumers relying on conventional power sources, imposing restrictions solely on distribution licensees would result in undesirable discrimination. Therefore, the Commission said it is not inclined to enforce any limitations on procuring 50% of the RPO requirement from projects within Maharashtra.

The Commission emphasized the need for coordinated efforts in developing RE capacity. While intra-state project success depends on bids and PPAs, overall, RE project development requires synchronized actions. This includes land acquisition, transmission infrastructure setup, timely approvals, and project development.

Delays in these aspects lead to commissioning delays and hinder meeting RPO targets.

It urged MEDA to proactively coordinate these efforts, crucial for achieving the ambitious 43% RPO target by 2030.

In May, The Commission approved MSEDCL’s proposal to procure 150 MW of solar power at ₹3.3 (~$0.040)/kWh from projects under MSKVY 2.0.

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