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Key Highlights of the Renewable Energy Certificate mechanism launched in India

The Union Power Minister, Shri Sushil Kumar Shinde launching the Renewable Energy Certificate (REC) Mechanism, a national level scheme to promote green energy by remote, in New Delhi on November 18, 2010. The Secretary (Power), Shri P. Uma Shankar and other dignitaries are also seen.  Photo no.CNR - 34856

The Union Power Minister, Shri Sushil Kumar Shinde launching the Renewable Energy Certificate (REC) Mechanism, a national level scheme to promote green energy by remote, in New Delhi on November 18, 2010. The Secretary (Power), Shri P. Uma Shankar and other dignitaries are also seen. Photo no.CNR - 34856

According to this release, from the Press Information Bureau, Government of India, Shri Sushilkumar Shinde, Union Minister of Power, has launched the Renewable Energy Certificate (REC) mechanism here today.

“Renewable Energy Certificate is a market based instrument which enables the obligated entities to meet their Renewable Purchase Obligation (RPO). Pertinently, the renewable purchase obligation is the obligation mandated by the State Electricity Regulatory Commission (SERC) under the Electricity Act, to purchase a minimum level of renewable energy out of the total consumption in the area of a distribution licensee. The REC mechanism also aims at encouraging competition and eventually mainstreaming renewable energy sources”, the Minister said.

Shri P Uma Shankar, Secretary (Power); Shri Deepak Gupta, Secretary (MNRE); and Shri S.K. Chaturvedi, Chairman & Managing Director, Power Grid Corporation of India Limited, also attended the function.

The launching of the REC provides for a mechanism for carbon trading within India and will help overcome some of the problems that have been associated with the same including:

  • RE Generators being located in a few states (eg. Tamil Nadu- Wind, Rajasthan, Gujarat – Solar, Himachal Pradesh, Karnataka – Small Hydro)
  • States with RE sources already have a high level of RPO
  • States are reluctant to buy energy from such sources beyond their obligation mandated by SERC
  • RE resource deficient States to fulfill their RPO
  • The RPO hence needed to be fixed state wise and not keeping the country as a whole in mind

The key highlights of the REC mechanism launched today are:

  • RE generators will have two options – either to sell the renewable energy at preferential tariff fixed by the concerned Electricity Regulatory Commission or to sell the electricity component and environmental attributes separately.
  • RECs can be traded in the Power Exchanges approved by Central Electricity Regulatory Commission (CERC).
  • States can now buy RECs to fulfill their RPO nationally from any RE generator in the country.
  • The Central Agency (the National Load Despatch Centre has been designated as Central Agency) will issue the REC to RE generators
  • One REC will be equivalent to 1 MWh of electricity injected into the grid.
  • The REC will be exchanged only in the Power Exchanges approved by CERC within the band of a minimum and a maximum price to be determined by CERC. CERC has already notified the price band (provided in the table below).
  • The distribution companies, Open Access consumer, Captive Power Plants (CPPs) will have the option of purchasing the REC to meet their Renewable Purchase Obligations (RPO).
  • There will also be compliance auditors to ensure compliance of the requirements of REC by the participants of the scheme.
  • Voluntary Purchasers like NGOs, the Corporate Sector, Individual Purchasers etc. may also purchase REC in order to meet their Corporate Social Responsibility or to support the environment.
Renewable Energy Certificate India CERC Price

Renewable Energy Certificate Pricing as fixed by CERC

The REC mechanism is being seen as one of the pioneering efforts in any developing country for mainstreaming the renewable generation through market mechanism.

In the long term, it is expected that RE generator be able to find market avenues for sale of electricity component through DISCOMs, traders, power exchanges, open access consumers and eventually reduce government dependence.

5 comments

  1. Good article Vineeth.

    As far as I have understood, the REC regulation implies that either I can sell the electricity from solar at the *preferential* tariff of around 17.91 Rs a unit (or whatever ) to the SEB or I will have to sell it as *normal* electricity at say 3.5 Rs a unit and then recover the balance amount as a REC price of 12 to 17 Rs.

    Am I right?

    • According to CERC, the definition of the pooled cost is as follows: ‘Pooled Cost of Purchase’ means the weighted average pooled price at which the distribution licensee has purchased the electricity including cost of self generation, if any, in the previous year from all the energy suppliers long-term and short-term, but excluding those based on renewable energy sources, as the case may be.

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