- The CERC has issued a suo motu petition proposing a downward revision of the trading floor and forbearance (ceiling) prices of RECs between 6.7% and 17.9% for the financial year 2012-2013.
- Lower price bands for both solar and non-solar RECs are proposed (see table below) and the CERC is seeking comments and suggestions on its proposal by 5 July 2011. The hearing on the petition will be held on 14 July 2011.
- The CERC is permitted (in consultation with the Central Agency and Forum of Regulators) to specify floor and forbearance prices for RECs from time to time by the Central Electricity Regulatory Commission (Terms and Conditions for recognition and issuance of Renewable Energy Certificate for Renewable Energy Generation) Regulations (Regulations).
- The Regulations specify a number of principles which the CERC should take into consideration when setting the floor and forbearance price, including:
- variation across states in the cost generation of different renewable energy technologies under the categories of solar and non-solar
- variation in the Pooled Cost of Purchase
- and expected electricity generation from renewable sources.
- Key data used by the CERC in setting the price bands is the Annual Pooled Purchase Cost (APPC) which is the weighted average pooled power purchase by distribution licensees (excluding power sourced from renewable energy projects and costs of transmission) in the Indian states during the financial year 2011-12.
- The floor price for non-solar RECs is based on the difference between the APPC and project viability costs corresponding to the renewable power generation forecasted for 2012.
- The forbearance price for non-solar RECs is based on the highest difference between the forecasted APPC for all the states and the costs of generation/RE tariff offered in various states.
- The floor price for solar RECs is based on the highest difference between the project viability cost for solar PV or thermal projects for FY2011-12 and the APPC.
- The forbearance price for solar RECs is based on the highest difference between the solar PV/thermal tariff for FY2011-12 and the APPC.
- The proposals suggest a drive from the CERC to promote competition, efficiency and investment in renewable energy projects. It would be interesting to see following the consultation whether the market agrees with its approach.
- RECs are a policy mechanism to promote renewable energy based power generation in India. Obligated entities are able to purchase RECs to meet their Renewal Purchase Obligations (RPO).
- REC trading was launched in India in February 2011 in an effort to promote cleaner energy nationwide. Under this programme, the clean energy producers are allowed to trade in RECs through CERC approved power exchanges. Technologies such as wind, solar PV, solar thermal, biomass and hydro are eligible to earn RECs.
- An REC is created when one megawatt hour of electricity is generated from an eligible renewable energy resource. RECs represent the benefit of renewable energy based electricity over electricity from non-renewable resources.
For more information or advice, please contact:
Partner, Head of clean energy and sustainability
Tel: 0845 498 7553
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