Power Ministry Makes Key Changes in REC mechanism To Boost Demand

The Union Power and new and renewable energy minister, R.K. Singh has approved key changes to the tradable renewable energy certificate (RECs) mechanism. Perhaps the biggest one is a decision to make the REC perpetual, till they are sold. Thus, it will take the pressure off renewable energy generators to sell within a timeline or see their REC’s wasted. It should also make these projects more bankable, by effectively guaranteeing sale of the REC’s at a time of their choosing. REC’s have been regularly used by state discoms to make up for shortfalls in their RPO (Renewable Purchase Obligations). These conditions on meeting RPO are set to become much stricter should the Electricity amendment bill be passed.

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Earlier, the union power ministry had circulated a discussion paper for redesigning the REC mechanism, that calls for renewable purchase obligations, or RPOs, to provide incentives to green energy sources.

“The proposed changes will provide some flexibility to the players, additional avenues, rationalization and also addressing the RECs validity period uncertainty issues,” the statement said adding that the “Validity of REC would be perpetual i.e., till it is sold.”

The issue of floor and forebearance  prices has also been dropped, with the CERC (Central Electricity Regulatory commission) fiven the power to track the trade in RECs as part of its overall role .

“The RE generator who are eligible for REC, will be eligible for issuance of RECs for the period of PPA as per the prevailing guidelines. The existing RE projects that are eligible for REC would continue to get RECs for 25 years,” the statement said and added, “A technology multiplier can be introduced for promotion of new and high priced RE technologies, which can be allocated in various baskets specific to technologies depending on maturity.”

Trading in REC’s has been stuck in issues for a while till now, after the prices fell to levels considered unremunerative by generators.

Expect some key industry associations, notably high energy usage sectors like Aluminium makers to protest this move however, as they are likely to see their purchase costs go up now.

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Prasanna Singh

Prasanna has been a media professional for over 20 years. He is the Group Editor of Saur Energy International

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