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Central power regulator extends validity of RECs by one year

According to reports, the Central Electricity Regulatory Commission has extended the validity of ‘renewable energy certificates’ (RECs) by one year.

RECs are generation-based ‘certificates’ awarded (electronically, in demat form) to those who generate electricity from renewable sources such as wind, biomass, hydro and solar, if they opt not to sell the electricity at a preferentially higher tariff.

These certificates are tradeable on the exchanges and are bought by ‘obligated entities’, who are either specified consumers or electricity distribution companies. These obligated entities may either be required to purchase a certain quantum of either green power or RECs. Trading happens on the last Wednesday of each month.

Till now, these instruments had a life of 365 days from the date of issue, after which they lapsed. The CERC recently put out a note on extending the life of the certificates and called for comments. The response from practically everybody was in favour of such extension.

“There is consensus in favour of extending the period of validity of the RECs,” says CERC, noting that however the suggestions for the duration of such extension varied from one year to five years.

Power System Operation Corporation Ltd, a wholly owned subsidiary of PowerGrid Corporation of India Ltd, even suggested that the CERC should “introduce a national level body known as ‘market maker’ or ‘price guarantor’ to act as the buyer and seller of the last resort.”

Since there has been overwhelming response in favour of extending the validity of the RECs, the CERC has ruled that the RECs “shall remain valid for a period of 730 days from the date of issuance.”

This order of CERC comes at a time when the trading in RECs has become tepid because most of the Obligated Entities—most of whom are state-owned electricity distribution companies—are just not buying the certificates and the respective state electricity regulatory commissions are not seen as enforcing the obligations.

The CERC has said that enforcing the RECs is the remit of the state commissions and CERC could do nothing about it.

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