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Renewable Energy Certificates (REC)
Renewable Energy Certificates (RECs) represent the green attribute of electricity generated from renewable energy sources. RECs are a policy mechanism to promote renewable energy based power generation in India. Technologies such as wind, solar PV, solar thermal, biomass, bagasse, black liquor and small hydro are eligible to earn RECs. Central Electricity Regulatory Commission (CERC) has notified Regulation on Renewable Energy Certificate (REC) in fulfillment of its mandate to promote renewable sources of energy and development of market in electricity. The framework of REC is expected to give push to RE capacity addition in the country.
Salient Features of the REC Framework :
CERC has designated NLDC as its Central nodal agency. The RE generators will have four options -
- To sell the renewable energy at preferential tariff fixed by the concerned Electricity Regulatory Commission to the state
- To sell the electricity generation and environmental attributes associated with RE generation separately. On choosing the second option, the environmental attributes can be exchanged in the form of REC. Price of electricity component would be equivalent to weighted average power purchase cost of the distribution company including short-term power purchase but excluding renewable power purchase cost.
- To sell it to a consumer directly and
- To consume as a captive consumption.
- The Central Agency will issue the REC to RE generators for the options 2,3&4.
- The value of One REC will be equivalent to 1 MWh of electricity injected into the grid from renewable energy sources.
- The REC will be traded only on the Power Exchanges approved by CERC within the band of a floor price and a forbearance (ceiling) price to be determined by CERC from time to time. At present the Floor price for Non Solar is Rs.1500/REC and Forbearance price is Rs.3300/REC and For Solar the floor price is 9300/REC and the forbearance price is 13400/REC..
- The distribution companies, Open Access consumer, Captive Power Plants (CPPs) will have option of purchasing the REC to meet their Renewable Purchase Obligations (RPO). Pertinently, RPO is the obligation mandated by the State Electricity Regulatory Commission (SERC) under the Act, to purchase minimum level of renewable energy out of the total consumption in the area of a distribution licensee. The percentage of solar and non solar RECs to be purchased is notified by the SERCs.
- There will also be compliance auditors to ensure compliance of the requirement of the REC by the participants of the scheme.
Renewable Purchase Obligation (RPO)
Renewable Purchase Obligation is the obligation mandated by the State Electricity Regulatory Commission (SERC) under the Act, to purchase minimum level of renewable energy out of the total consumption in the area of a distribution licensee. It is in this context that the concept of Renewable Energy Certificates (REC) assumes significance. This concept seeks to address the mismatch between availability of RE sources and the requirement of the obligated entities to meet their RPO. It is also expected to encourage the RE capacity addition in the States where there is potential for RE generation as the REC framework seeks to create a national level market for such generators to recover their cost.
- REC mechanism offers alternative to fulfill RPO targets by entities.
- Obligated entities can plan to meet RPO targets in efficient manner.
- Long-term visibility of floor and forbearance price is necessary to ensure regulatory certainty for utility as well as RE project developers.
- National level tradability of RECs would allow obligated entities/distribution licensees to fulfill their obligation despite natural diversity. RECs may be purchased from generators located in other states. Limited source endowments in a particular state may only permit lower renewable obligation.