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Indian Renewable Energy Certificate market crashes with only 10% RECs sold and that too at the floor price

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Indian Renewable Energy Mandate not Met

India’s much hyped market based renewable energy incentive system of “Renewable Energy Certificate” (REC) has crashed. The REC market which started in 2012 at two power exchanges had initially shown a lot of promise with increasing volumes. It had offered a market based remuneration system for renewable energy developers in India. The buyers were electricity consuming entities which have to meet a gradually increased green energy mandate of 15% by 2020. However the continuous lack of enforcement of Renewable Purchase Obligations (RPO) by the government has meant that the buyers are not buying the RECs despite the mandate to do so. This means that not only will the Renewable Energy mandate not be met, but green investors will face heavy losses as well. This will derail the confidence of cleantech investors in India who are not assured of sufficient returns on a risky sector. The wind energy industry in India is facing massive problems already due to the removal of federal incentives of accelerated depreciation and GBI. This comes as an additional blow.

November REC trading marks a new low

Against the 12,30,061 non-solar RECs offered for sale, only 1,32,352 (10.7 per cent) were bought. The 40 per cent fall in demand reflects the lack of interest on the part of the obligated entities to buy the RECs. This, in turn, is due to tepid enforcement of the obligations, market observers say. These were also bought at the floor price of Rs 1,500 a REC. The non-solar prices have remained at floor price (IEX)/near to floor price (PXIL) in a fourth consecutive month.

“With existing set of buyers completing major part of their requirements, and no new buyers appearing in near term horizon, the market condition looks very gloomy. The confidence of all the investors on the mechanism completely looks shattered and probably every investor would be thinking on how much they should trust Indian regulatory framework,” says Pandya.

We have been highlighting the problems with the REC market

1) REC Markets are notoriously difficult to set up and run– India 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 it is impossible to set the Perfect Right Price.

2) Volatile REC Prices  – However the market for REC remains volatile due to the fact there is a lot of uncertainty with RPO. The biggest source of this problem is the fact that RPO is not enforceable by the regulator. If the state slips in its RPO, it does not have to bear any penalty or punishment. Given the pathetic state of the electricity distributors in the state with billions of dollars in debt, it seems unlikely that they will buy expensive green energy to meet their RPO.


The biggest problem with the REC market in India remains the non enforcement of Renewable Energy mandate. As long as that is not solved, the market will remain oversupplied with these green certificates and the price will remain stuck at the floor price with the majority of the certificates not getting solar. The solar RECs is still developing which allows it to be traded at decent prices. Once a decent supply comes in, it will face the same issue as the non-solar RECs.


Sneha Shah

I am Sneha, the Editor-in-chief for the Blog. We would be glad to receive suggestions, inputs & comments on GWI from you guys to keep it going! You can contact me for consultancy/trade inquires by writing an email to

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