The market for Renewable Energy
Certificates (RECs), which has been witnessing downturn for the past three years, could be staring at an end soon. While the trading of solar
RECs has been stalled for a year now, non-solar
ones would last be traded on March 28 because the regulated price band rendered the market unviable.
Close to 3.9 million non-solar
RECs will be traded this week and if all are sold, it will mark the end of the trading. The industries dependent on these certificates for meeting their renewable power obligations are worried about the implications if the RECs market ceases to exist.
There are around 1,200 projects under REC
mechanism with a total capacity of 5,383 Mw. The trouble began in March 2017, when Central Electricity
Regulatory Commission (CERC) reduced the REC
prices to a historic low to match prevailing tariffs. The floor price of solar REC
was reduced to Re 1/unit and forbearance price to Rs 2.4/unit. It was earlier Rs 3.5/unit and Rs 5.8/unit, respectively. For the non-solar
and others), the floor price was reduced to Re 1/unit and forbearance at Rs 3/unit. It was earlier in the range of Rs 1.5-3.5/unit.
The generators asked the APTEL to suggest means to clear the existing stock of RECs which would be hampered by the new price regime. The Supreme Court, in a separate case, however, allowed the trading of non-solar
RECs with the earlier prices. APTEL is yet to give a decision in the matter which has led to backlog of RECs.
ones where the trading was allowed in the last four months saw good trading. In the past four months, the non-solar
RECs traded were 1.2 to 5.2 million. The last tranche of 3.9 million will be trading next week, which would be cleared in one go, said a market expert.
"There was an overall improvement in the renewable purchase obligation (RPO) which led to turnaround in the non-solar
RECs. After more than five years, demand of RECs exceeded supply However, due to huge backlog, RECs were sold at the floor price,” said a trader. Against a demand of 14 million RECs, there were 4.8 million non-solar
With no clarity on solar
RECs and non-solar
ones too going off market, purchasers and sellers of these certificates, like distribution companies, thermal power producers, open access consumers, would have to look at alternate mechanism to meet RPO.
Sector experts said thermal captive industry of 65 Gw would need close to 20 million RECs while open access consumers would need 7.5 million RECs annually. There is also 272 Gw of thermal power capacity which needs to meet RPO.
“The existing 32 Gw of wind power
capacity cannot meet requirement of REC
demand of 337 Gw. There will be immense shortfall in the coming years,” said a renewable power expert.
He added the demand from these consumers would continue as they do not have access to power procured by SECI.