Supreme Court dismisses Green Energy Association appeal on stopping REC price revision by CERC
Under the Renewable Purchase obligation, obligators (like DISCOMs, Captive Power Plants-CPPs and other consumers) have to either buy electricity generated by specified 'green' sources, or buy, in lieu of that, 'renewable energy certificates (RECs)' from the market. Govt introduced the RECs as a market-based instrument to promote and incentivize renewable energy and facilitate compliance of RPO by obligator (CPPs, Discoms)/conventional power generators, who do not have solar RE generating resources like land, roof or 270 days sunshine or located in a coastal areas facing frequent cloudy weather.
“However there is an acute shortage of Renewable Energy Certificates in the market which has prompted the market to be a sellers’ one. REC prices have spiked up in past 12 months to as high as Rs. 2.25 Rs/kwh for Solar RECs while it is a known fact that Solar power itself has been getting auctioned at average rate of Rs. 2.50 /kwh since FY17-18”
Prices of Solar RECs in the last one year have shot up by more than 125% (from Rs 1000 / MWhr to Rs 2250/MWhr) putting an additional burden of Rs. 1.25 / kwh of RE energy compliance for all consumers; DISCOMs as well as Industry. This huge burden on the consumers is due to the non-revision of REC prices since 2017 by the regulator, despite steep fall in RE generation costs.
Industry associations like AAI & CCPPO have submitted to Govt and Regulator that the primary reason for illiquidity in the power exchange or REC market for failed trades is that the utilities or demand side participants understand that the actual price of REC is much lower than the floor price allowed by Hon’ble Commission and the REC prices are expected to go down in time.
India needs an active and vibrant solar REC market to shore up the demand for and supply of long-term low-cost renewable energy. Revised CERC ‘floor’ and ‘forbearance’ price for solar RECs as per new realities (post covid-19) will be a major step forward to correct skewed solar REC market. Timely implementation by the regulators is the key to facilitate cheaper power to promote industrial production for home and exports to march towards ‘Aatma Nirbhar Bharat’.