Central Electricity Regulatory Commission, guided by the National Action Plan on Climate Change (NAPCC) has envisaged increasing the share of renewable energy in total electricity consumption of the country.
Despite sufficient resource potential to achieve Renewable energy Purchase Obligations (RPO’s) prescribed by various State Electricity Regulatory Commissions, the geographic distribution of these resources coupled with existing constraints in access and transmission infrastructure, has led to a situation where in achieving Renewable Purchase Obligation goals for some states has become difficult .
To address these issues, CERC has devised a framework to institutionalize Renewable Energy Certificate (REC) mechanism at National level
- The obligated entities for minimum percentage of electricity procurement from renewable sources are the distribution licensee and captive plant users.
- Separate RPO may be proposed for open access customers depending upon finalization of draft REC framework.
- SLDC to be designated as State Nodal Agency.
- Penalty for shortfall in RPO’s @ prices over forbearance prices in few states.
- Every state has its own obligation defined by State Electricity Regulatory Commission (SERC)
The renewable energy technologies approved by the ministry of non-renewable energy will be eligible under renewable energy certificates mechanism. Besides, grid connected renewable energy generators of at least 250 kw capacity would also benefit. Eligible renewable energy generators would receive a certificate for a specified quantity of electricity generated. However as per MNRE generation plant using 25% coal mix which also qualify for REC.
REC mechanism is NOT an incentive scheme. Rather it will enable sale and purchase of renewable component across the State boundaries. REC mechanism will coexist with all current incentive based schemes, since most of these schemes are based on certification of generation.
RECs prove to be a market-based financial instrument to promote renewable energy and facilitate renewable energy portfolio obligations which can make the renewable electricity market stable and predictable by maximizing the benefits of renewable generation while reducing costs.
Besides, introduction of tradable REC could provide one additional source of revenue to the RES based power generators and these could also be used by those states, which do not have substantial RE resources, to meet their RPO.
NLDC as supreme authority, SLDC as nodal agency and State wise auditing authority.
The certificate holder can sell power to the required states, individuals or other trading companies. There will be a national registry under the national load despatch centre, where the producer could register and which would monitor the supply of power to various states. This system will encourage competition and create a market for power across the states
The RE generators will have two options – either to sell the renewable energy at preferential tariff fixed by the concerned Electricity Regulatory Commission or 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.
The Central Agency will issue the REC to RE generators.
1 REC = 1MWh = 1000kWh (i.e. 1000 units)
The REC will be exchanged only in 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.
|
Non solar REC (Rs/ MWh) |
Solar REC (Rs/ MWh) |
Forbearance Price |
3,900 |
17,000 |
Floor Price |
1,500 |
12,000 |
The demand for renewable energy certificates can be created through compliance or voluntary markets.
- Compliance markets are often created by a policy that stipulates a Renewable Portfolio Standard through which the electric utilities are required to supply a certain percentage of their electricity from renewable generators by a specified year.
- Voluntary markets are created where customers choose to buy renewable power, out of range of concerns such as reducing their climate change footprint or due to a broader attempt to become ‘green’. Renewable Energy Generators that do not have a Renewable Portfolio Standard can sell their RECs to voluntary buyers, usually at a cheaper price that compliance market RECs.
There is an uneven distribution of renewable energy potential in the country, certain states are generating high percentage of electricity from renewable sources while others are not procuring even a minimum percentage; resulting in uneven tariff burden on consumers across the country. A REC system could help offset, to a certain extent, this anomaly. REC Mechanisms enable market growth and improve the commercial viability of the RE electricity. REC measures can provide a greater push to RE electricity by way of removing the bottlenecks like higher costs, uneven distribution of RE resources across India, and scheduling or despatchability of RE electricity, in procurement of RE electricity by utilities.
Key features of the proposed REC mechanism in India are as follows:
- One REC will be issued to the RE generator for one MWh electrical energy fed into the grid. This energy will need to be produced from an approved Renewable Energy Source.
- The purchase of RECs will be deemed as a purchase of power generated from renewable sources and accordingly will be allowed for compliance the RPO target.
- The REC mechanism will enable Obligated Entities in any State to procure RECs generated in any of the States in India and surrender the same to satisfy its RPO target.
- The State Load Dispatch Centers (SLDC) and proposed new institutions such as National level REC Registry and State level Monitoring Committees are envisaged to play the pivotal role in day-to-day operation of REC mechanism.
- Can be sold once only.
- Every REC is sold by a unique code generated per generation unit.
- Sold on last Wednesday of each month.
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, 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.