Next-Gen Solar Energy Hub : Gujarat, India

Story of launching Renewable Energy Certificates in India and allied facts

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.