REC trading norms announced in India

19-02-2010, Delhi, India

In January 2010, the Central Electricity Regulatory Commission (CERC) of India announced renewable energy certificate (REC) norms in an attempt to encourage investments in the renewable energy sector. A REEEP-funded project together with IREDA is currently working to outline the specifics of the implementation.

According to the new norms, the regulator will designate a central agency to issue RECs to generators who can sell them to green energy-deficient states utilities, so they can meet their renewable purchase obligations at lower cost. There will be two categories of certificates, solar certificates and non-solar certificates.

RE generators will have two options – either to sell the renewable energy at a preferential tariff fixed by the concerned Electricity Regulatory Commission or to sell the electricity generation and environmental attributes associated with RE generation separately.

The Electricity Act 2003 requires each state commission to specify a renewable purchase obligation (RPO) - a quota of RET – for the State. However, the uneven distribution of renewable energy potential discouraged States (like New Delhi) with lesser renewable energy generation sources from setting higher RPOs; whereas states such as Rajasthan and Tamil Nadu where there is high potential were not encouraged to harness that potential beyond their quota.

The new norms create incentives which should go part-way to solving this problem. By creating a market for green certificates at a national level, States with low RE potential will be enabled to reach their quota at less expense by buying certificates from States where RET can be generated at a low cost. Renewable Energy generators in the States with high potential are simultaneously encouraged to overproduce against their own State quota.

This will help India to meet its national RES target. As at 31st July, 2009, renewable energy sources constituted only about 8.5% of the total generation capacity of India. In terms of actual generation, the share of renewable is estimated to be in the range of 3.5% of the total. The National Action Plan of Climate Change (NAPCC) has set the target of 5% renewable energy purchase for FY 2009-10, which will increase by 1% per year for the next 10 years.

The current project builds on previous work supported by the Sustainable Energy Regulation Network (SERN), a sub-network of REEEP. It is being implemented by ABPS Infrastructure and IREDA.

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