Captive Cogeneration Plants To Meet RPO Obligations Out Now, Says MERC

In a ruling that will await final judgement on a challenge in the Mumbai High Court, the Maharashtra Electricity Regulatory Commission (MERC) has ruled to  eject a petition from JSW Steel to consider power produced from its fossil fuel based co-generation plant as a set off for its Renewable Purchase Obligations (RPO) in the state.

With a writ pending in the High court on the change in regulations made in 2016, that ruled out fossil fuel based co-generation plants on the same footing as RE projects, the commission has chosen to give JSW steel  exemption from RPO obligations on the  power consumed by JSW Steel Limited from its fossil fuel-based Co-Generation Captive Power Plant for the period applicable under MERC (Renewable Purchase Obligation, its Compliance and Implementation of Renewable Energy Certificates Framework) Regulations, 2010. The cogeneration plant at the company’s Dolvi facility generates almost 67.5 MW of power for captive consumption and for other group firms in the state.

For the post 2016 period, the order states that “captive users will have option of depositing the amount equivalent to REC Floor Price of the shortfall units and further on year to year basis to meet its RPO, with the MEDA. The relevant excerpts from the Order are as below:
“11. In the light of the above-mentioned facts including the provisions of the Regulations and that since no stay is granted by the High Court, the Commission is of the opinion that the Petitioner is bound to follow the prevailing Regulations. Since the Commission as allowed other obligated entities to meet its obligation by March 2020, the Commission is allowing similar concession to the fossil fuel based cogeneration plants to fulfill its cumulative RPO targets by March 2020.

Alternately, the Commission will be initiating the RPO Compliance verification process for FY 2014-15 to FY 2016-17 for CPP users and OA (Open Access) Consumers. After crystallization of the verification process is completed by the Commission, the shortfall (if any) will be ascertained, and the petitioner shall deposit the amount equivalent to the REC floor prices of the shortfall units and further on year
to year basis to meet its RPO, with the MEDA till such time the writ petition is decided by the High Court. The Commission opines that this alternative option will address the concerns of the petitioner about the possible hardship in case it succeeds in the High Court”

The judgement is a very interesting milestone on the argument between energy efficiency and renewable purchase obligations, in this case. When the particular steel plant with the cogeneration plants was set up by Ispat Group originally, the energy savings from the co-generation plant were a key factor in making it a viable project. Plus, the law in 2010, placed cogeneration and RPO’s on an equal footing, ensuring that cogenerating plants were not attached with RPO obligations. That changed in 2016, after MNRE specified RE sources that culd be taken for RPO obligations.  Throwing a spanner into the plans of multiple co-generation plants across the country.

The captive power market itself in India, beyond cogeneration which can hardly be faulted, is run almost completely on fossil fuels. Its a market that one hopes will shrink faster now, with promises of 24X7 power, as well as natural ageing of these plants. That will help create space for demand growth as well as more renewable capacity to support RPO in the future.

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Prasanna Singh

Prasanna Singh

Prasanna has been a media professional for over 20 years. He is the Group Editor of Saur Energy International

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