India’s power ministry redesigns Renewable Energy Certificate (REC) mechanism

The Ministry of Power and New & Renewable Energy will be redesigning the existing renewable energy certificates (REC) mechanism.  The intent is to align the ‘mechanism’ with the emerging changes in the power scenario and also to promote new renewable technologies which will consequently pave the way towards removal of the floor as well as forbearance price limits for these instruments.

The proposed changes will provide some flexibility to the players, additional avenues, rationalisation, and also address the RECs’ validity period uncertainty issues, said the ministry issued statement.

Extensive stakeholder consultations have been held towards drawing up these changes. The ministry had circulated a discussion paper on redesigning the REC mechanism on June 4, 2021.

Under the redesigned mechanism, the validity of the REC would be perpetual, that is till it is sold. Besides, the floor and forbearance (maximum) prices are not required to be specified. The Central Electricity Regulatory Commission (CERC) will have a monitoring and surveillance mechanism to ensure that there is no hoarding of RECs.

The renewable energy (RE) generators eligible for RECs will be eligible for the period of the power purchase agreement (PPA) as per the prevailing guidelines. The existing RE projects that are eligible for RECs would continue to get them for 25 years.

The RECs can be issued to obligated entities (including discoms and open access consumers) which purchase RE power beyond their renewable purchase obligation (RPO) compliance notified by the government.

No REC will be issued to the beneficiary of subsidies/concessions or waiver of any other charges. The FOR (Forum of Regulators) will define concessional charges uniformly for denying the RECs. It will also allow traders and bilateral transactions in REC mechanism. The proposed changes in the revamped REC mechanism will be implemented by the CERC.

To address the mismatch between the availability of RE sources and the requirement of the obligated entities to meet their renewable purchase obligation (RPO), a pan-India market-based REC mechanism was introduced in 2010.

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