India's largest state moves forward on Solar Power though scale seems too small
July 3, 2013Solar and Wind Energy to double to 8% of Global Electricity generation by 2018 from 4% now
July 4, 2013REC in India
The Renewable Energy Certificate (REC) scheme is the major policy initiative taken by the central government to use a market based mechanism, to promote green energy in India and meet the target of 15% green energy generation by 2020. However, the REC market has become inoperable in recent times as utilities and companies are not meeting their RPO obligations. The companies that were meeting their green energy obligations have also stopped, as the regulators were not taking any action against the defaulters. So you were basically paying money for no reason in other sense.
The REC market has seen the prices touch bottom as there were no buyers for RECs. Thousands of REC could be found in the order book at the floor price without any bidders. The solar REC segment has also recently crashed as the general market problem started affecting this segment also. This has put in jeopardy the private solar parks that are being constructed to take advantage of the solar REC scheme. This is separate from the reverse auction won solar plants in the country. These plants mainly depend on the REC sales for their economic viability.
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.
Regulators finally wake up
The state electricity regulator seems to be finally waking up to the problem with the Chattisgarh regulator warning Jindal Steel and SAIL that they would be fined heavily for not meeting their RPO limits. Jindal Steel has been making tons of excuses to avoid paying up its legal obligations. Note the company is one of the ringleaders in the coal scam and has seen its stock price dive due to the allegations against bribing ministers for buying coal mines. MNRE has also sent notices to 50 large companies to meet their RPO obligations.
More Needs to be Done
The CERC should make it mandatory for companies and electricity users to meet their RPOs or fine them heavily otherwise the abuse will continue and green energy in India will be a death blow. The other state regulators should also learn from Chattisgarh that they need to enforce the law, otherwise they will suffer in the long run.
Steel Authority of India Ltd. and Jindal Steel & Power Ltd. were threatened with fines for flouting clean-energy rules as regulators crack down on lapses that undermine the nation’s renewable-credit trading market.India’s second- and third-biggest steelmakers, under scrutiny in Chhattisgarh, failed to get the required portion of power from renewable sources in the three years through March, according to the State Electricity Regulatory Commission.Non-compliant companies must buy credits at the ceiling price of 3,900 rupees for biomass, hydro and wind allowances and 17,000 rupees for solar. That compares with June market prices of 1,500 rupees and 9,300 rupees, respectively. Each credit represents 1 megawatt-hour of electricity fed into the grid.Jindal Steel and Steel Authority aren’t the only companies to be targeted by regulators. Vedanta Resources Plc’s Hindustan Zinc unit, Holcim Ltd.’s Ambuja Cements, Reliance Industries Ltd. and Tata Steel Ltd. have also been ordered to comply.In September, the Rajasthan High Court ordered Hindustan Zinc and Ambuja Cements to pay penalties for failing to meet obligations in the northwestern state. In November, the Ministry of New and Renewable Energy sent letters to 50 companies including Tata, India’s biggest steelmaker, insisting they comply or face fines.