Ministry of Power Proposes Restructuring Renewable Energy Certificates Mechanism

The stakeholders have time until June 25, 2021, to submit their suggestions


The Ministry of Power has released a discussion paper on redesigning the renewable energy certificate (REC) mechanism for stakeholder comments. The stakeholders have time until June 25, 2021, to submit their suggestions.

As per the measures proposed for the restructuring of the REC mechanism, the REC will remain until it is sold. Currently, the validity of RECs is 1,095 days, and CERC determines the floor and forbearance prices, which until now have been revised four to five times for non-solar and solar RECs.

As the RECs will be perpetually valid, there is no need for floor and forbearance prices to be specified and REC holders will have the freedom to decide when they want to sell the RECs. The Central Electricity Regulatory Commission (CERC) will be required to monitor the process so that there is no hoarding of the RECs and the creation of artificial prices in the market.

The order of CERC notifying the floor and forbearance prices, effective from July 01, 2020, is sub-judice. RECs have not been traded since July 2020 due to the stay order by the Appellate Tribunal for Electricity (APTEL) in response to the petitions filed by several renewable energy associations regarding revision in the floor and forbearance prices.

Also, as per the proposed measures, the renewable energy generators will be eligible to issue RECs for 15 years from the date of commissioning of the projects. Similarly, the existing renewable energy projects would continue to get RECs for 25 years.

The Ministry has also proposed introducing a multiplier, under which less mature renewable energy technologies can be promoted over the other matured renewable technologies.

Any technology which needs to be promoted may be identified two years in advance. For such projects, at least 15 years of policy visibility would be provided to attract investments and promote such technologies in renewable energy.

A technology multiplier can be allocated in various baskets specific to technologies depending on maturity. The multiplier would also take care of old technologies depending on the date of commissioning of the project. Also, once a multiplier is given, it would continue for 15 years for that project.

For example, Technology-A, which is at a nascent stage, can be issued 3 RECs for every MWh energy sale, which is subject to a 3X multiplier. As the adoption of the technology progresses along the maturity path, it can gradually be reduced. Based on the policy boost to be given to specific technologies, the multiplier can vary.

The concept of negative list and sunset clause may also be considered for other technologies depending upon their maturity levels. The negative list could include obsolete technologies, whereas a sunset clause will provide for the automatic exclusion of any technology once a specific date is reached. These conditions will apply to new renewable energy projects. The renewable energy projects which have already been commissioned are excluded from these conditions.

To incentivize renewable energy procurement beyond the renewable purchase obligation (RPO) targets, only DISCOMs will be issued RECs for quantity beyond RPO.

RECs can be issued to obligated entities that purchase renewable power beyond their RPO compliance targets to incentivize them to achieve the RPO targets and go beyond the RPO level.

According to another measure proposed by the Ministry, RECs should not be given to any seller who is benefitting or preferential treatment.

The Ministry has also proposed that the trader’s role should be enhanced in REC trading, which will bring in two key advantages, i.e., it will give long-term visibility to the buyers of the REC, and they can easily fulfill the RPO targets. Further, the small buyers can bank on the traders for buying RECs. This will ensure that even the small buyers who find difficulty in trading in the REC market will fulfill their RPO targets.

Subscribe to Mercom’s real-time Regulatory Updates to ensure you don’t miss any critical updates from the renewable industry.