CERC Allows Fortnightly Trading of Renewable Energy Certificates for Six Months

REC fungibility will enable obligated entities to meet RPO obligations across different sources


The Central Electricity Regulatory Commission (CERC) has directed the Grid Controller of India (Grid-India) to organize two Renewable Energy Certificate (REC) trading sessions every month– the second and last Wednesday of each month– for the upcoming six months, starting from October.

The Commission clarified energy sold by renewable energy generators registered under the REC mechanism in conventional market contracts at power exchanges is eligible for the issuance of RECs. However, if this energy is sold in the green market segment at power exchanges, it will not be eligible for REC issuance.

The Commission also decided to maintain the current price discovery method, which is the double-sided uniform price auction, for RECs in the market after considering proposals for changes, such as removing floor and forbearance prices, introducing reverse auction, forward auction, and bilateral trade methods, and allowing buyers and sellers to initiate auctions.

The Commission also endorsed REC fungibility, which allows obligated entities to fulfill renewable purchase obligations across various renewable energy technologies using RECs interchangeably.


Indian Energy Exchange (IEX) had sought approval to modify REC contracts, eliminating restrictions on REC registered projects in green markets, endorsement of REC allocation mechanisms, and augmentation of REC auction frequency.

In parallel, Power Exchange India (PXIL) also filed a petition to gain consent for implementing one-sided reverse auction and one-sided forward auction mechanisms for RECs. It sought to maintain the existing ‘Double Sided Closed Bid’ system with a uniform price structure for varying timeframes and enhance information exchange between power exchanges and the nodal agency for REC redemption.

Fortnightly trading

REC Regulations 2022 stipulates that RECs should be exchanged through power exchanges or electricity traders. Currently, RECs are traded on the last Wednesday of each month.

Power exchanges requested approval to increase the frequency of REC auction sessions from monthly to weekly. They argued that the REC Regulations 2022 permit the exchange of RECs through trading licensees on any or all days of a month. Additionally, the power exchanges claim to have received requests from stakeholders for more frequent trading sessions.

GRID-India expressed concerns about increasing the frequency of REC trading sessions. It said obligated entities purchase RECs mostly in the third and fourth quarters of the financial year to meet their annual Renewable Purchase Obligation (RPO) targets. GRID-India also noted a substantial gap between buyers and sellers of RECs. It contended that increasing the trading frequency may not necessarily boost liquidity in the market and could potentially lead to higher costs for participants, power exchanges, and the central agency. Grid-India issued a public notice to gather feedback from stakeholders regarding the proposal to increase the frequency of REC trading sessions. The feedback received was mixed.

After discussions between the Grid-India and power exchanges, a compromise was proposed. The parties suggested increasing the frequency of REC trading sessions to fortnightly (every two weeks) for a trial period of six months. They would then assess the market’s response during this trial period to determine whether to continue with weekly trading sessions, revert to fortnightly sessions, or return to the previous monthly frequency.

The Commission reviewed the proposal and agreed with the compromise. It directed that REC trading sessions should be conducted on the second and last Wednesdays of each month for the next six months, starting from October.

It also urged the Grid-India to furnish a comprehensive review report following this experimental period.

Enabling REC-registered projects to participate in green markets

The issue revolves around whether energy sold by renewable generation registered under the REC mechanism in various market segments is eligible for the issuance of RECs.

In response to a request by IEX, Grid-India sought to know if energy sold by renewable generators in any conventional market is eligible for REC issuance. Grid-India proposed that if the same energy is sold in the green markets at power exchanges, no REC should be issued for that particular energy.

In its interim order issued on December 15, 2022, the Commission noted that Grid-India had already modified the Detailed Procedure under the REC mechanism. According to this mechanism, it was specified that uncleared bids of renewable generators in the Green Day Ahead Market (GDAM), if transferred and cleared in DAM, would be eligible for the issuance of RECs. This provision is aligned with the REC Regulations of 2022. Therefore, it was determined that energy sold by renewable generators registered under the REC mechanism in any conventional market at a power exchange would be eligible for the issuance of RECs. However, if the same energy were sold in the green market segment at power exchanges, no REC would be issued for it.

The National Load Despatch Center (NLDC) also confirmed that the modified REC detailed procedure allowed for the issuance of RECs to renewable generators participating in the Integrated Day Ahead Market (IDAM) and selling energy in the conventional segment of IDAM, provided their bids remained uncleared in the renewable energy segment of IDAM. This eligibility was subject to the condition that the renewable generators met all other criteria for REC issuance as outlined in the REC Regulations of 2022.

Price Discovery and Auctions

In the current REC market, price discovery is based on a double-sided uniform price auction. This means buyers and sellers submit bids, and the final price is uniform for all successful transactions.

IEX proposed changes to the price discovery process. It suggested removing the floor and forbearance prices while maintaining the double-sided auction. It also proposed introducing two new methods–  reverse auction and bilateral trade. In a reverse auction, buyers initiate competitive bidding to purchase RECs. In bilateral trade, buyers can engage in continuous trading throughout the day.

PXIL proposed two new REC market contracts: reverse auction and forward auction. Reverse auction allows buyers to initiate auctions where multiple sellers submit offers to sell RECs. Forward auction allows sellers to initiate auctions where multiple buyers submit bids to purchase RECs.

The Commission said a more detailed examination of these proposals was required. It acknowledged that such changes would require significant adjustments to the REC web portal, protocol for information exchange, and approval timelines. It also noted that the REC Regulations 2022 already allow transactions through traders, and the experience gained from this new approach should be reviewed.

Mechanism for allocation of RECs

The REC Regulations of 2022 eliminated the categorization of RECs as solar and non-solar but required indicating the origin of the RE source on the certificate. Power exchanges proposed different methodologies for allocating RECs to buyers for RPO compliance, including allocation based on buyer’s preference and pro-rata basis.

NLDC held discussions with power exchanges and GRID-India regarding the allocation methodology, with GRID-India suggesting pro-rata allocation based on buyer’s preference.

The Forum of Regulators (FOR) agreed to allow the fungibility of RECs to fulfill any RPO specified by state electricity regulatory commissions.

CERC endorsed the FOR’s decision, supporting the idea of REC fungibility to meet RPO requirements across any RE technology source.

The Commission also suggested that obligated entities approach state regulators to approve the REC fungibility in line with the FOR’s decision.

CERC instructed NLDC to provide feedback on implementing this allocation method within six months.

REC trading in IEX dropped by almost 47% quarter-over-quarter in the second quarter of the calendar year 2023, according to the Q2 2023 Mercom India Solar Open Access Market Report. The volume traded in the Green Term Ahead Market on the IEX fell nearly 20% QoQ.

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