Renewable Purchase Obligation (RPO) in enabling energy transition

(Contest entry for Masdar Engage 2016)

Sustainable development looks to be a general priority for the Governments and corporations alike. Developing countries are looking to sustain year on year growth whilst balancing the need to minimize fossil fuel use and switch to renewable energy. Likewise big companies are exploiting the developing markets to sustain global business. Top companies are also keen on implementing their sustainability practices in the local environment. The Government has a balancing role to play between attracting investors and also fulfilling climate change commitments.

Role of Government

Governments are typically accused for a lack of policy framework but I believe Governments typically fail in enforcing policies when it comes to energy and emission reduction. Policies related to emission reduction and renewable energy is typically modified versions of policy implemented elsewhere. One of the key policies is Renewable Purchase Obligation (RPO). I advocate this policy for implementation in developing countries that look to balance growth and keep the global temperatures below 2°C. If implemented this could fill the gap for energy shortage while simultaneously increasing the demand for new renewable energy projects.

Renewable Purchase Obligation (RPO)

Industrial and commercial consumers typically have the highest energy consumption. This policy initiative will require all industrial/commercial consumers to procure certain percentage of their energy from renewable energy sources. Obligated entities can either install their own power project or procure renewable energy through open access transmission network or even buy energy trading certificates. This policy initiative can also be scaled up by starting with a low percentage of 1% and then increasing them year on year. The policy if enforced will be successful in developing countries where there is a demand for energy and the price from fossil fuels is increasing while the price from renewable energy is witnessing a decline. This policy will also enable big corporations to shift towards renewable energy and will see significant emission reductions.

Major Benefits

By adopting this policy the governments could expect to see a reduction in energy emissions. Investment in renewable energy projects will increase. This will foster partnerships between renewable energy companies and MNCs in developing renewable energy projects. Demand for renewable energy will increase which will see more interest from developers in setting up power projects. A significant size of renewable energy projects will aid in climate change mitigation for the government.

Recent developments from top manufacturers demonstrate the interests from corporations in claiming to procure renewable energy power. Their sustainability claim will increase. The average power costs will decrease in long term as the share of renewable energy in their portfolio increases.

Can RPO drive the global sustainable energy transition by 2030?

It could well deliver. For example, if Indian states implement their RPO for solar we could see solar alone contributing to 8% of the grid electricity by 2019. On the contrary, irrespective of whether RPO is successfully implemented or not there is bigger problem in developing countries, its infrastructure. There is a lack of infrastructural facilities to accept renewable energy. Grid availability turns out to be the biggest issue, there will be a need to upgrade existing transmission infrastructure. Another crucial issue with respect to renewable energy like solar is the availability of land. If the Governments plug these key holes then implementing RPO would prove to be a major factor in transition from the era of fossil fuels to renewable energy and fighting global climate crisis.

This post is a contest entry for Masdar Engage Blogging contest 2016. You can review the post at Masdar Engage 2016.