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Story of launching Renewable Energy Certificates in India and allied facts

Tuesday, May 25, 2010 Leave a Comment

You know it feels really good when you envisage something and it really turns up sooner than later. Few days back, I wrote a story on Renewable Energy Certificates (RECs) and understanding its mechanism. RECs are imperative for reducing the payback period and it has been adopted successfully in US for the solar energy growth. Yesterday, an official from Central Electricity Regulatory Commission released a statement that RECs will be launched in August 2010 with an agreement with 2-3 seller and equal number of buyer states. The RECs will subsequently be traded on Indian power exchanges.
Initial Participants
REC Selling States
REC Buying States
·         Gujarat
·         Maharashtra
·         Rajasthan
·         Madhya Pradesh

·         Himachal Pradesh
Indian Exchanges where it will be traded
·         Power Exchange of India
·         Indian Energy Exchange
The most important aspect is still pending: Pricing of the RECs! The tentative rates for each category of RECs are:
Price Segment
Solar REC
Non-Solar REC
Floor price
INR 12,280 (USD 258) per MWh
INR 1,450 (USD 30) per MWh
Forbearance price
INR 17,230 (USD 362) per MWh
INR 3,780 (USD 79) per MWh
The biggest concern that remains: Liquidity of tradable RECs. This needs to be addressed only by the market players and speculators. I think market making should be allowed in the initial stages by the power exchanges. This can apply the same model as it is followed in US. Market makers should be hired by the power exchanges and they should trade for increasing the volume of the RECs.
This development can be a win-win situation for all the concerned entities: solar power producers, government, customers and utilities.

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