Green in the red: India's woes of unsold renewable energy and the need for uniform tariff

Stricter enforcement of RPO norms by every state discoms is the need of the hour, as per industry experts.

The indictment of Gautam Adani and others by the US Department of Justice (DoJ) and the Securities and Exchange Commission (SEC) has exposed India's problem of India's unsold green power.

Industry estimates show that nearly 30 GW of green projects have no takers. The energy available at these projects remains has no contract from distribution companies (discoms). SECI, one of the largest renewable energy implementation agencies in India, alone has at least 9 GW of unsold renewable power.

In April 2023, the Centre-mandated CPSUs - SECI, NTPC, NHPC and SJVN - to cumulatively bid for 50 GW of renewable projects every year till FY28 - a step towards India’s goal to have 500 GW of non-fossil fuel based power generation capacity by 2030.

Why do we have unsold renewable energy despite high power demand?

India’s power consumption has been soaring to new heights with the peak demand hitting 250 GW this summer. At the same time, India's renewable energy capacity has surged 165 percent in the last decade, from 75.52 GW in 2014 to over 203 GW in 2024.

With the increased deployment of RE, its cost of power has decreased over the years. Solar power tariffs in India have witnessed a significant reduction from the peak of over Rs 17 per unit in 2010 to about Rs 2.5 per unit.

As a result, while more and more renewable projects are being tendered, selling power from old renewable projects is becoming increasingly difficult as the tariffs from newer or subsequent projects keep coming down. Due to better prices available, discoms that are financially strained, are either unwilling to sign power supply agreements (PSAs) with procurers such as SECI or negotiate heavily. Consequently, SECI fails to sign power deals with the RE developers.

Uniform Renewable Energy Tariff (URET)

A solution to the problem of unsold renewable power could be Uniform Renewable Energy Tariff (URET), which was cleared by the Centre in October 2023. But, is yet to be implemented.

The URET is a plan to issue a single rate for renewable energy across sectors in India. Under this, implementing agencies such as SECI will buy renewable energy from generators and sell it to discoms at a uniform tariff. The tariff will be calculated monthly for each category such as solar, wind, and hydro.

“URET will help because discoms tend to postpone signing of PPAs expecting that the tariffs discovered will come down further. It will help create a more equitable renewable energy market in India,” said Vikram V, vice-president and co-group head of corporate ratings at ICRA Ltd.

A senior official in the Ministry of New and Renewable Energy said impact assessment of the policy is in the final leg after which it shall be implemented.

Renewable Purchase Obligation (RPO)

Stricter enforcement of RPO norms by every state discom is the need of the hour, industry experts said.

RPO is a mandate that requires discoms to purchase or secure a minimum amount of their power needs from renewable energy sources. The minimum RPO for every state is different as it is set by the respective State Electricity Regulatory Commission (SERC). Several states do not publish their RPO compliance data. Hence, there is no centralised open system where the central government can show the RPO compliances by discoms in each state.

"RPOs promote power procurement from renewable sources, which would ensure enough off-take. An analysis of states based on publicly available data reveals a shortfall in nearly 25 out of 30 states in meeting their annual solar RPO targets," DownToEarth magazine wrote in May.