SC allows trading of Renewable Energy Certificates

Supreme Court
The Supreme Court on Tuesday allowed trading of renewable energy certificates (RECs) on the appeal of Indian Wind Power Association (IWPA). However, the order is restricted to non-solar RECs and would have to comply with the earlier prices.

In March 2017, Central Electricity Regulatory Commission (CERC) reduced REC prices to a historic low. The floor price of solar REC was reduced to Rs 1/unit and forbearance at Rs 2.5/unit. It was earlier Rs 3.5/unit and Rs 5.8/unit, respectively. 

For non-solar (wind and others), the floor price was reduced to Rs 1/unit and forbearance at Rs 2.9/unit. It was earlier in the range of Rs 1.5-3.5/unit.
The order was challenged by REC generating companies in the apex court and in the Appellate Tribunal of Electricity (APTEL). The petitioners had submitted that lowering the prices would never clear the unsold stock of close to 10 million RECs. The generators asked the APTEL to suggest ways to clear the existing stock of RECs, which would be hampered by the new price regime.

There are around 1,200 projects under the REC mechanism, with a total capacity of 5,383 megawatt (MW).

Allowing the trading to commence, Supreme Court’s final decision in the matter would be taken by APTEL, which is separately hearing the case over decrease in REC prices. The Court said during the trading, the difference in the old and new price would be deposited with the regulators till the matter is pending.

Meanwhile, APTEL on July 14  postponed the hearing in the matter by two months. Sector experts are worried that this might lead to backlog in REC market.

“Trading will resume in the case of Non-solar RECs, but will remain suspended in the case of Solar RECs. However, we believe that it will be some time before trading can start as CERC will have to develop modalities to accept such a deposit,” said REConnect Energy, a renewable energy trade facilitating agency.

Executives said buyers would hardly be interested in complicated procedure. “Given the lack of any pressure to comply with RPOs, it is unlikely that any obligated entity will spend a higher amount while the matter is still sub-judice in the APTEL,” said REConnect in an analysis report.

Under the Renewable Purchase Obligation notified under the National Tariff Policy, makes it obligatory for distribution companies, open-access consumers and captive power producers to meet part of their energy needs through green energy.

The states or utilities that are unable to fulfil their RPO can buy REC, which represents 1mw-hour of power produced from a renewable energy source and are tradable at power exchanges. It is divided into Solar REC and non-solar REC.

REC market, launched in 2010, has crashed last year with more than 1 crore certificates going unsold and has not made significant improvement since then. In the last REC trading before it was stayed during the March 2017, the price discovered was Rs 1/unit for both non-solar and solar RECs.

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