According to provisions of the Electricity Act 2003, the State Electricity Regulatory Commissions (SERCs) are required to fix a minimum percentage of the total consumption of electricity in the area of a distribution licensee for purchase of energy from non-conventional energy sources. The concept of Renewable Purchase Obligation (RPO) was thus born in the country. Consequently, the SERCs in various States have come up with 3-5 year trajectories for RPOs. The SERCs were later also asked to reserve within the percentage so made applicable, to start with, a minimum percentage of 0.25% for purchase of solar energy under a Solar Purchase Obligation (SPO), going upto 3% by 2022. Under the Draft Amendment to the Tariff Policy, now under consideration, the SPO is sought to be raised so that it reaches at least 8% in energy terms by March, 2019. This is being done with a view to accelerate solar deployment in order to reach the goal of 100,000 MW by 2022, which includes a target of 40,000 MW for solar rooftop projects. The applicability of RPO and SPO extends beyond discoms to Captive Generators and Open Access (OA) Obligated Entities (OEs) as well.

In May, 2015, the Supreme Court dismissed an Appeal by 17 companies challenging the RPO Obligations enforced by Rajasthan Electricity Regulatory Commission (RERC). This ruling is starting to have a wider impact as there are a number of similar cases pending in various State High Courts on the applicability of RPO Obligation in the captive and OA segments. In fact, the impact was immediately felt through a more active market for Renewable Energy Certificates (RECs) in May, 2015 which had been fairly dormant thus far. The ruling will hold good in regard to SPOs too. To ensure compliance, States are starting to impose penalties on the OEs. The raising of the SPO limit to 8% by 2019, and strict compliance measures, are expected to spur investments in solar projects, particularly in solar rooftop projects by industrial and commercial consumers towards meeting their regulatory obligations.