June 18, 2018

Indian Solar Target – Major Roadblocks
Revolving Around DISCOMs
and Regulatory Framework

The 750 MW Rewa solar project in MP has witnessed a record fall in tariffs to Rs 2.97/ kWh. And Levellized tariff coming out to Rs 3.29/ kWh. This can certainly be attributed to lower solar module cost, constituting about 60% of capital costs, which have reduced by 26% in the last year. Private sector is definitely going to play a pivotal role. But the role of Power DISCOMs (Distribution Companies) and their financial strength can not be ignored, when it comes to develop the last mile distribution infrastructure. UDAY reform package for DISCOMs is very critical in strengthening the contribution of DISCOMs. The required investment will need regulatory and legislative support. Renewable purchase obligation (RPO), mandated under the Electricity Act, 2003, has not been effective in securing the incentives of renewable power generators. Continuous non-compliance by state electricity distribution companies in meeting their assigned target of RPOs never caught the attention of state level regulatory commissions (SERCs). Poor implementation of regulations (RPO) and lapses in regulating, monitoring, controlling the DISCOMs to make sure they abide by their obligations is understood to be the root cause and major bottleneck. The Indian renewable energy sector is not governed by a single legal framework that is applicable for all the states and is dependent on multiple laws, regulations, and agencies. It leads to delays in decision making, brings inefficiency in the system, and eventually hampers investors’ confidence. Apart, the industry lacks strategic direction in terms of national renewable energy targets, which comes differently from various agencies. NAPCC suggests its 15%, MNRE, 10%, while IEP, 6%. (% of total power generation). Dispute resolution is another major bottleneck in the development of this sunrise sector. Land acquisition issues, taxation, etc. are extremely susceptible to falling into disputes and hence these issues are required to be addressed promptly and transparently. In order to attract investors, though the NDA government has taken some initiatives by setting up an expert committee to facilitate regulatory mechanism and remove bureaucratic red tape, the implementation, again, is a question mark.