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September 15, 2010India has started a Renewable Energy Certificate (REC) Scheme recently to boost the share of Clean Energy Sources in India’s Electricity Mix.India’s Electricity Regulator (CERC) has come out with a notification making it mandatory for Electricity Utilities to buy 6% of their requirements from Green Energy Sources.However the REC Scheme still faces teething problems in its implementation.It would take a couple of years for a well developed market in RECs to develop if everything goes to plan.Note REC are notoriously difficult to implement as Italy and Australia have found out.High Prices led to Booms while Low Prices lead to a Green Bust while its impossible to set the Perfect Right Price.
India has ambitious plans for setting up Solar Energy Installations with the JNNUSM receiving an overwhelming response.India is already the 5th Largest Wind Energy Country in the World.The REC Subsidy will further boost the economics of Green Energy Plants and help in obtaining financing But the Problem is that India’s Electricity System remains mired in Inefficiency,Defaults and Short Term Populism.Solar Energy is facing financing problems due to the bad financial condition of the State Electricity Distributor.Even the REC Scheme is facing hurdles as the crucial players in India’s Electricity Ecosystem remain in poor financial health.Defaults and Huge Losses are nothing new for poorly managed SEBs which makes implementing Renewable Energy a Tough Problem.Inspite of these hurdles,progress is being made with Power Exchanges applying to the CERC for licenses to start trading in RECs.
REC could boost investment in renewable energy, says Fitch – FE
India’s move to introduce renewable energy certificate (REC) scheme should help improve cost economics of renewable energy projects and attract investments to the sector. However, there are still many regulatory and institutional challenges to be tackled to make the scheme successful, says the international credit ratings agency Fitch Ratings.However, developing a successful REC scheme would be a challenge, given the constraints in the Indian power market like high commercial losses of state electricity boards and their weak financial health.In case, discoms are not all allowed to pass through high cost of renewable energy to consumers, their financial health might further weaken.