Merc, in a notification on regulations on renewable power obligation (RPO), has said the renewable power component will have to be procured either physically at a preferential rate, or through the purchase of RECs.
RPO, fixed at 6% for 2010-11, will increase by 1% every year. The obligation will also include captive power plans in the state. Failure to comply will invite penalties, which cannot be passed onto the consumers.
MSEDCL authorities, however, point out that the REC option in a shortage scenario may lead to monopoly and that the REC pricing will be linked to the penalty that year. They said that the REC mechanism will give rise to unfair competition among the utilities and may also lead to inter- and intra-state disputes.
MSEDCL buys 85,000 million units each year, but the installed capacity for solar power in the state is 1mw till June. To meet the target of 0.25%, MSEDCL will have to buy 140mw for this fiscal. It will have to buy the RECs, which could cost upto Rs17 a unit, from other states at an estimated cost of Rs350 crore.