Regulatory Uncertainty And Poor RPO Compliance Has Made Solar Projects Non Bankable

Posted · Add Comment

The recent Gujarat turmoil to reduce the PPA price from 12.67 Rs/unit to 9 Rs/unit has made many solar investors to worry on bankability of PPA signed with the state governments. It has not been seen earlier that an agreed PPA price has come for discussion amendment to the regulatory commission, rather it should not have been admitted by GERC.


While most of the states  are not in the position to put RPO compliance on Distribution Licensees and as well as on Captive Generators, the saleability of RECs as become a question mark and no bank is ready to finance a project  based on REC route. Although the RPO guidelines clearly specifies that if an obligated entity fails to comply with RPO target, it has to purchase RECs as penalty as forbearance price decided by CERC. Although the RPO regulation clearly specifies that the state agencies will submit quarterly status of RPO compliance. It has been observed that none of the state agencies are doing these follow up with the obligated entities. In fact most of the state agencies are not having the list of captive users and open access consumers to which they are supposed to enforce the RPO obligation. The recent order by MERC has directed the state nodal agencies MEDA (Maharashtra Energy Development Agency) to prepare a list of Captive users/Open access consumers and file quarterly compliance report of all obligated parties which includes the Distribution Licensee and Open Access Consumers.


If state nodal agencies are to enforce RPO compliance on Captive/Open access consumers, there is a need to formulate accreditation mechanism for all these consumers so that the state enforcement can clearly highlight and enforce the RPO on these consumers. Some of the state nodal agencies are trying take data of Captive /Open access consumers from electrical inspector offices, however there is no clear authentication of these capital consumers by distribution licensee.

If government really want to support solar and achieve the targets of 10GW in next five years ,there is need to stream line the bidding process and clearly define PPA guidelines so that the solar projects becomes bankable. At the same time if RPO obligation is enforced and penalties are strictly imposed on the deflator obligated entities so that investors will have faith in solar projects under REC route as well. We have already written in our previous blog articles on how policy initiatives by government can make solar projects bankable. It is expected that upcoming schemes of Solar Energy Corporation of India (SECI) will make successful implementation of 750MW solar PV projects under viability gap funding (VGF) and banks will consider VGF based projects as bankable projects.


Dr. Sanjay Vashishtha. & Rishikesh Muthyal

Leave a Reply

Your email address will not be published. Required fields are marked *