Renewable Energy Certificate (REC) Policy is starting in India tomorrow which will allow Green Energy Generators to earn additional tariff over and above the normal wholesale electricity price.Note the REC Mechanism is also present in different forms in Italy,USA and Australia and has proven a good incentive to promote Renewable Energy in those countries.India’s Central Electricity Regulator (CERC) has been implementing a Comprehensive Policy to boost Green Energy Generation.CERC had earlier mandated a 6% Renewable Energy Percentage from Alternative Energy which would go upto 15% by 2020.The REC Policy will help in achieving those targets by providing a pseud0 market linked mechanism to inentivize Green Power Producers.
What is REC
The REC Scheme is a Policy whereby Renewable Energy Generators are granted a REC per MwH of Green Energy that they contribule to the Grid.These RECs can be traded on Exchanges whereby Green Energy Producers can sell them to Buyers.Energy Deficient Entities have to buy these RECs in order to meet their Renewable Energy Targets.Note each state in India has a Renewable Purchase Obligation(RPO) which is decided by the State Electricity Regulator (SERC).RPO means that the State has to compulsorily consume a fixed percentage of electricity from Renewable Energy Sources.Some states in India like Tamil Nadu,Gujarat are rich in Green Energy while others like Bihar,Delhi and Maharashtra are deficient.Power Exchanges in India have already set the ball rolling in terms of trading in RECs.
Who will Benefit
Renewable Energy Companies and Green Utilities are set to benefit the most from this Policy.Suzlon has already welcomed the policy saying that Financing will ease for Renewable Energy Projects.Orient Green Power,the largest Green Focused Utility will also be a big beneficiary.Local Indian Wind Turbine Companies should also benefit from the Scheme.It also provides companies outside the JNNSM to get decent returns from solar generation as the REC band for Solar REC has been set between Rs 12-17/Kwh.India need to increase Renewable Energy Capacity by at least 50 GW in the next 10 year to meet the 15% CERC Target.
The Regulatory framework for REC mechanism has been notified by CERC and the REC mechanism is being supported by MNRE and the Ministry of Power. REC mechanism is expected to bring new investments in renewable energy projects and help introducing market based competition in renewable energy sector.To address this mismatch, the Electricity Regulatory Commissions have collectively evolved REC mechanism under which the green electricity is to be split into two components, i.e. electricity and the green attribute. The electricity component can be sold to local distribution utilities at a price of conventional electricity and the green attribute is converted into REC which the generator can sell to the utilities of States like Delhi. Such a utility can fulfill its renewable purchase obligations by purchasing RECs.