VATIS UPDATE Article

The Central Electricity Regulatory Commission (CERC) has proposed to decrease the floor prices of renewable energy certificates (RECs), making it easier for the state discoms to meet their renewable energy purchase obligations (RPOs). For solar, the proposed floor price is Rs. 1,000 per REC, substantially lower than the current rate of Rs. 3,500. For non-solar RECs, the proposed floor price has been suggested to be Rs. 1,000, down from the current Rs. 1,500.

The proposed reduction in REC floor prices are in line with the fall in renewable energy costs. REC mechanism is a market-based instrument to promote renewable energy and facilitate compliance of RPOs. It aims to address the mismatch between availability of renewable energy resources in the states and the requirement of the obligated entities to meet their RPOs. One REC is treated as equivalent to 1 MWh of green electricity.

RPO mandates that all electricity distribution licensees should purchase or produce a minimum specified quantity of their requirements from renewable energy sources. The state electricity regulatory commissions fix the minimum RPO for the states. The forbearance prices of RECs, or the upper price limit at which the RECs can be traded, have also been proposed to be cut. Forbearance prices for solar RECs may be slashed by more than half to Rs. 2,500 from Rs. 5,800.