Impact of Renewable Energy Certificate (REC) …...2017/09/07  · Impact of Renewable Energy Certificate (REC) Mechanism in India Authors: S. K. Soonee, K. V. S. Baba, U. K. Verma,

Impact of Renewable Energy Certificate (REC)

Mechanism in India

Authors: S. K. Soonee, K. V. S. Baba, U. K. Verma, Minaxi Garg, Shailendra Kr. Verma and K. C. Saini

Power System Operation Corporation Ltd. (POSOCO)

Submission ID -210

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Installed Capacity

1.7 % of the total solar potential

10.7 % of the total wind potential

175 GW Target for Renewable Energy by 2022

All India Installed Capacity- 3,30,152 MW RE Installed Capacity- 58,303 MW

As on 31.07.2017, Source: CEA

• Federal Structure

• Electricity is a concurrent subject

• Principal Central Legislation o Electricity Act, 2003

o Basic policy and regulatory framework

• Regulatory Framework o Central level

o Central Electricity Regulatory Commission (CERC) (Inter-State)

o Province level o State Electricity Regulatory Commission (SERCs) (Intra-State)

o Forum of Regulators - for harmonization

Legal Framework

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Electricity Act, 2003 : Enabling Provisions

• Electricity Act 2003 has outlined several enabling provisions to

accelerate the development of RE based generation o National Electricity Policy and Plan o Tariff Regulations by Regulatory Commission o Purchase Obligation from Renewable Energy Sources o Development of market (including trading) in power

• RPO Trajectory notified by Ministry of Power

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Why REC Mechanism was created?

• Renewable sources are not spread evenly across country

• Many states with no or little RE were not able to promote RE

• States with good RE felt they have exhausted their capacity to absorb

• It is difficult to carry out inter-State sales using CERC OA Regulations for large scale deployment of RE following reasons:

o Most RE generators are difficult to schedule

o Transaction would be expensive due to low capacity factors of RE

o RE generators are not connected to STU but to DISCOMS

o Intra-state balancing systems have not yet stabilized

• Therefore, a mechanism that will enable inter-state sale and purchase of renewable energy was required.

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GREEN

ATTRIBUTE

ELECTRICITY

RENEWABLE ENERGY

CERTIFICATE

SOLAR CERTIFICATE

NON-SOLAR CERTIFICATE

Concept of Renewable Energy Certificate

One REC represents one MWh of energy generated from renewable sources 6

Electricity Component

RE Generation

Sale of Green Energy

REC Component

Obligated Entities / Voluntary Buyers

Distribution Company / Third Party Sale/

Power Exchange

Obligated Entities

CERC REC Regulations -2010

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Sell to DISCOM at Pooled cost of

Power Purchase

2. Grid Connected RE technology approved by MNRE under following routes

Self Consumption/ Captive use Third party sale/Open

Access PPA with Distribution

Licensee

Plant Commissioned between 29.09.2010 and 31.03.2016 and not availing benefit in the form of concessional / promotional transmission or wheeling charges and/or banking facility benefit & registered before 30.06.2016

RE generator is not availing benefit in the form of concessional/ promotional transmission or wheeling charges and/or banking facility benefit

PPA at rates as determined

under section 62 and 63 of Act

Eligible Eligible Not Eligible

Plant Commissioned prior to 29.09.2010 or after 31.03.2016

Not Eligible Eligible

Eligibility for Registration under REC Mechanism

1. Distribution Licensee – which has purchased Renewable Energy over and above their RPO

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Participation Voluntary

REC Denomination 1 REC = 1MWh

Validity 1095 days after issuance

Categories 1. Solar 2. Non-Solar (unique certificate number)

Sellers Eligible RE Generators / Distribution Licensees (DISCOM)

Buyers 1. Obligated Entities (DISCOM/ CPP / OA Consumers) 2. Voluntary

Trading Platform Power Exchanges / Self Retention

Trading Periodicity Last Wednesday of the month

Banking / Borrowing Not Allowed

Transfer Type Single transfer only, repeated trade of the same certificate is not possible

Solar RECs Floor Price: ₹ 1000 / MWh Forbearance Price: ₹ 2400 / MWh

Non-Solar RECs Floor Price: ₹ 1000 / MWh Forbearance Price: ₹ 3000 / MWh

Penalty for Non-compliance ‘Forbearance’ Price (Maximum Price)

Price Guarantee Through ‘Floor’ Price (Minimum Price)

Salient Features of the REC Mechanism

STAGES UNDER REC MECHANISM

1. ACCREDITATION 2. REGISTRATION

4. REDEMPTION

RE GENERATOR APPLIES ONLINE STATE AGENCY VERIFIES DETAILS STATE AGENCY ACCREDITATE/ REJECTS

ACCREDITATION

REGISTRATION

ISSUANCE

TRADE & REDEMPTION

RE GENERATOR APPLIES ONLINE CENTRAL AGENCY VERIFIES DETAILS CENTRAL AGENCY REGISTER/ REJECT

RE GENERATOR APPLIES ONLINE (10th ,20th and last

day of month)

SLDC VALIDATES ENERGY INJECTION REPORT

CENTRAL AGENCY ISSUES REC

Redemption through Power Exchanges (PX) BUYERS & SELLERS PLACE BIDS AT PXs POWER EXCHANGES SEND PROVISIONAL FILE TO CENTRAL

AGENCY FOR VALIDATION OF SALE BIDS CENTRAL AGENCY SENDS EXCEPTION REPORT IF ANY PXs PROCESS FINAL TRADE Redemption through Self-retention of RECs by RE generators

3. ISSUANCE

Processes in REC Mechanism

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Key Highlights:- • Transparent • Accessible pan India • User Friendly • Real Time Data on REC • Single Touch Point for information

for RE Generators

REC Portal Home Page | https://www.recregistryindia.nic.in

NLDC designated as Central Agency for REC Mechanism by Hon’ble CERC

The NLDC has developed various procedures to operationalize REC mechanism

Important Amendments in REC Regulations

• RE generator eligible for RECs from the date of commercial operation or from the date of registration whichever is later

• Incentive to DISCOMs to procure beyond RPO target - DISCOMs eligible to receive RECs

• Project under Self-consumption route is not eligible for new Registration

• Vintage Multiplier Factor of 2.66 for Solar Generators- upto 31.03.2017

• An RE Generator may retain RECs for offsetting its RPO as a consumer

• Revocation of RECs/recovery of sale proceeds of RECs if the project Registered on false information

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Floor and Forbearance Price

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• Investment facilitated by the REC Mechanism o Provides avenue to RE generator(s) to sell their power locally to DISCOM and/or

open access consumer o Capital investment of more than ₹ 220 billion have been made by the stakeholders

• Facilitates RPO Compliance o DISCOM, Captive Power Plants (CPP) and Open Access consumers as the obligated

entities have purchased REC

• Impact on CO2 Emissions o Emission reduction of 34 Million ton of CO2 o RECs included in the India’s intended nationally determined contribution (INDC)

under UNFCCC

• Integrity and Probity of the REC Mechanism • Capacity Building • Dissemination of Information and Transparency

Impact of REC Mechanism on Stakeholders

• APTEL Order dated 20th April 2015 The judgment delivered by Appellate Tribunal is on the petition filed by InWEA against all State Commissions for enforcement of RPO

o Monitoring of compliance of RPO should be carried out periodically as provided in Regulations.

o Carry forward/review should be allowed strictly as per the provisions of the Regulations keeping in view of availability of REC

o In case of default in fulfilling RPO, the penal provision should be exercised

o SERC are bound by their own Regulations

• Hon’ble Supreme court (SC) judgment dated 13th May 2015 Hindustan Zinc vs Rajasthan Electricity Regulatory Commission(RERC) on the applicability of Renewable Purchase Obligation (RPO) regulations. The Hon’ble SC ruled that:

o RPO on Captive consumer and Open Access consumer is justified

o Obligated entities have option to purchase RECs from Power Exchange(s)

o Subsequent to the Order, till 31.08.2017, Captive Power Plants and Open Access consumers purchased 10.2 Million RECs( ~70 % of the total)

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Few Judicial Orders regarding RPO Compliance

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• Hon’ble CERC vide order dated 30.03.2017 reduced the Floor and Forbearance Price w.e.f. 01.04.2017

• Against CERC order, many stakeholders have filed Petition before Appellate

Tribunal and Hon’ble Supreme Court • Hon’ble Supreme Court vide interim order dated 08.05.2017, stayed the

trading of RECs • Hon’ble Supreme Court vide order dated on 14.07.2017, allowed the trading

of non-solar RECs as per CERC Order dated 30.03.2017 • Further, till the matter is pending before APTEL, the difference between the

old and new floor price shall be deposited with CERC by the Power Exchange(s)

• Trading of Solar RECs shall remain suspended until further orders

Non - Solar REC Solar REC Non - Solar REC Solar RECForbearance Price

(Rs./MWh)3,300 5,800 3,000 2,400

Floor Price (Rs./MWh)

1,500 3,500 1,000 1,000

Floor and Forbearance price of REC

Prices after the order dated 30.03.2017

w.e.f. 01.04.2017 Prices prevalent before the

order dated 30.03.2017

Hon’ble Supreme Court Order regarding REC Trading

• RE generators from 21 States are participating in the REC Mechanism • RE Projects with capacity as low as 0.10 MW (Solar) and as high as 50.4 MW (Wind)

As on 31.08.2017

Non- Solar Solar Non- Solar Solar

1 Reliance Infrastucture Ltd. Maharashtra 16.06.2016 4,590 56,310 532 1,3622 HPSEB Ltd. Himachal Prades 11.07.2016 541,000

Total 545,590 56,310 532 1,362

No. of RECs issued No. of RECs RedeemedName of DISCOM State

Date of Registration

S. No.

Source-wise Breakup

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No. of RECs Issued

Closing Balance

Capacity UnitPower

ExchangeSelf

Retention

1 Wind 2,428 563 15,777,104 9,045,507 979,433 5,752,164

2 Urban or Municipal Waste 0 0 72,892 44,105 0 28,787

4 Solar PV 734 361 7,006,010 1,653,478 50,067 5,302,465

5 Small Hydro 255 33 3,449,804 2,224,537 6,285 1,218,982

6 Biogas 2 1 16,843 9,970 5,010 1,863

9 Biomass 558 62 8,152,013 5,233,717 136,485 2,781,811

10 Bio-fuel cogeneration 507 75 7,025,908 4,173,799 5,001 2,847,108

4,484 1,095 41,500,574 22,385,113 1,182,281 17,933,180

No. of RECs RedeemedSourceSN

Registered

Total

Wind, 2,428 MW

Biomass, 558 MW

Bio-fuel cogeneration,

507 MW

Solar PV, 734 MW

Small Hydro, 255 MW Biogas, 2 MW

Registered Capacity: 4484 (MW)

Projects Registered under REC Mechanism

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S. No. state No. of

Projects

Registered Capacity

(MW)

1 Rajasthan 104 2392 Madhya Pradesh 100 1853 Maharashtra 60 914 Tamil Nadu 56 1215 Andhra Pradesh 16 366 Telangana 10 287 Gujarat 4 78 Chhattisgarh 3 89 Odisha 3 5

10 Delhi 2 811 Haryana 1 112 Kerala 1 113 Tripura 1 5

TOTAL 361 734

Details of Registered Solar Project

0200400600800

100012001400160018002000

2011 2012 2013 2014 2015 2016 2017

1814

1516

792 736

328 491

214

Registered Capacity (MW) Year-Wise

Till 31.08.2017

REC Trading Details

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Sale Bid

Buy Bid

RECs Traded

RECs Traded Till 31-Aug-2017 : ~2.23 Crore (22.3 Million) RECs worth ₹ 3860 Crore (US$ 603 Million) in 76 trading sessions. Inventory: More than 1.85 Crore (18.5 Million) RECs worth ₹1850 Crore * (US$ 289 Million) *Floor price @ ₹ 1000/REC

No. of RECs Issued and Redeemed

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Forbearance Price (till, March 2012) = Rs. 3,900/MWh

Forbearance Price (w.e.f Apr, 2017) = Rs. 2,900/MWh

Floor price = Rs. 1,500/MWh (w.e.f. June 2010)

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Trading of Non- Solar RECs and Market Clearing Price (₹/REC)

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• RPO Compliance o For sustainable REC Market strict enforcement of RPO compliance by concerned

SERCs o RPO monitoring system at the State as well as Central Level o Bankability of the Projects due to huge inventory of the RECs

• Demand-Supply mismatch impacting the trading of RECs

o Huge REC inventory due to oversupply of RECs in comparison to demand

• Deepening of Voluntary Market o Up to 30th March 2017, 29,226 RECs have been purchased by Voluntary buyers o Most of the RECs were purchased by Central Public sector Enterprises o Voluntary procurement of RECs reduced considerably

• Market Design related Issues o Types of RECs (Solar and Non-solar) being issued to the RE generators o Need for Vintage and technology based Multiplier factor, secondary market etc.

• Capacity Building of Stakeholders at all levels

Challenges and Way Forward

Web Links

• www.cercind.gov.in • www.powermin.nic.in • www.mnre.gov.in • www.forumofregulators.gov.in • www.posoco.in • www.cea.gov.in • www.forumofld.in • www.iexindia.com • www.powerexindia.com

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