New Delhi: The supreme court on Tuesday took cognizance of a matter seeking stay Central Electricity Regulatory Authority’s REC (Renewable Energy Certificates) price revision by CERC and dismissed the application of Green Energy Association.

This is an important development, as the high prices of RECs had been causing an additional burden to the tune of Rs 654 crore annually (based on FY19-20 figures from Power Exchange) on the consumers in power tariffs.

Experts in the industry say that the impact would be much higher in coming years when compliance levels are expected to rise. The Supreme Court summarily dismissed any prayers of stay on CERC order realizing the impact that the delay in regulations may be causing.

Under the Renewable Purchase obligation,  obligators (like DISCOMs, Captive Power Plants-CPPs and other consumers) have to either buy electricity generated by specified ‘green’ sources, or buy, in lieu of that, ‘renewable energy certificates (RECs)’ from the market. Govt introduced the RECs as a market-based instrument to promote and incentivize renewable energy and facilitate compliance of RPO by obligator (CPPs, Discoms)/conventional power generators, who do not have solar RE generating resources like land, roof or 270 days sunshine or located in a coastal areas facing frequent cloudy weather.

“However there is an acute shortage of Renewable Energy Certificates in the market which has prompted the market to be a sellers’ one. REC prices have spiked up in past 12 months to as high as Rs. 2.25 Rs/kwh for Solar RECs while it is a known fact that Solar power itself has been getting auctioned at average rate of Rs. 2.50 /kwh since FY17-18”

Prices of Solar RECs in the last one year have shot up by more than 125% (from Rs 1000 / MWhr to Rs 2250/MWhr) putting an additional burden of Rs. 1.25 / kwh of RE energy compliance for all consumers;DISCOMs  as well as Industry. This huge burden on the consumers is due to the non-revision of REC prices since 2017 by the regulator, despite steep fall in RE generation costs.

Industry associations like AAI & CCPPO have submitted to government and regulator that the primary reason for illiquidity in the power exchange or REC market for failed trades is that the utilities or demand side participants understand that the actual price of REC is much lower than the floor price allowed by the Commission and the REC prices are expected to go down in time.

India needs an active and vibrant solar REC market to shore up the demand for and supply of long-term low-cost renewable energy. Revised CERC ‘floor’ and ‘forbearance’ price for solar RECs as per new realities (post covid-19) will be a major step forward to correct skewed solar REC market. Timely implementation by the regualtors is the key to facilitate cheaper power to promote industrial production for home and exports to march towards ‘AatmaNirbhar Bharat’.