What are Renewable Purchase Obligations (RPOs)?

Renewable Purchase Obligations (RPOs) constitute a set of obligations and targets that mandate power distribution companies and large power buyers to procure a specific percentage of their energy from renewable sources. The proportion of renewable energy utilized by utilities is determined by both national and state electrical regulatory commissions.

States establish RPO goals for both solar and non-solar energy acquisition. These targets are set for solar and non-solar power, and Obligated Entities, including discoms, open access consumers, and captive power producers, must uniformly adhere to and meet them across all states and union territories.

Under RPO, mass purchasers are obligated to buy a predetermined percentage of Renewable Energy Certificates (RECs). Suppliers of renewable energy also have the option to purchase RECs, serving as market-based tools promoting the use of renewable energy and fostering electricity market growth. The price of RECs is determined by market demand and is constrained by the Central Electricity Regulatory Commission’s specified floor price (minimum) and forbearance price (maximum).

What is the Penalty for Renewable Purchase Obligations (RPOs)?

The RPO Penalty is a critical aspect that necessitates the development of a comprehensive framework to enforce compliance and impose penalties for noncompliance. This is critical for the Renewable Energy Certificate (REC) and Renewable Purchase Obligation (RPO) mechanisms to function properly.

The Electricity Regulatory Commission of each state and union territory has the authority to ensure compliance and develop rules outlining penalties for noncompliance. Every state has incorporated several broad penal guidelines, including:

1. Obligated entities that fail to meet RPO targets will face a penalty on the weighted average REC price. This penalty is assessed after the relevant year’s compliance at power exchange centres.

2. Regulations of State Electricity Regulatory Commissions (SERCs) have the authority to carry over penalty amounts to subsequent years in the case of defaults in one or more consecutive years.

3. In cases of absolute noncompliance involving fraudulent activities or account manipulation, SERCs have the authority to levy fines based on the obligated entities’ kilowatt-hour shortfall.

Additional measures are in effect, including the possibility of taking legal action against non-compliant businesses. Penalties may escalate for repeated violations. This system serves as a market deterrent, prompting entities to prioritize compliance and thorough checks to prevent penalties.

Also Read: What is RES (Renewable Energy Standard)?

What is the Difference between RPO and RECs?

Understanding the differences between Renewable Energy Certificates (RECs) and Renewable Purchase Obligations (RPOs) is crucial for exploring renewable energy:

Aspect	Renewable Energy Certificates (RECs)	Renewable Purchase Obligation (RPOs)
What are they?	1 REC = 1 MWh of RE injected into the grid. There are two kinds of RECs: solar RECs and non-solar RECs.	Targets for obligated entities specifying minimum renewable energy percentages. RPO targets solar and non-solar sources.
Issuers/Setters	Based on SLDC reports, POSOCO grants RECs to projects. Discoms may be eligible for RECs if their RPOs are exceeded.	The Ministry of Power determines the national RPO trajectory. SERCs determine state-specific minimum RPOs.
Purchase/ Compliance Methods	RECs purchased on energy exchanges (IEX and PXIL) or retained for self-consumption. They are not resaleable.	RPOs are met by obligated entities through self-generation, power purchases, or the acquisition of RECs.
Entities Involved	Discoms, open access consumers, captive power producers, and voluntary buyers such as individuals and businesses purchase.	RPOs are followed by required entities such as discoms, open-access consumers, and captive power producers.