Energetica India 89 - May 2020

REC Trading in India: Way Ahead The flexibility in purchasing any type of RECs would help in easing the cash flow situation of renewable generating plants as RECs are sold in shortest possible time. Introduction National Action Plan for Climate Change (NAPCC) announced by Government of India on 30.06.2008 envisaged several measures to address global warming. One of the important measures identified involved increasing the share of Renew - able energy in total electricity consumption in the country. NAPCC had set the target of 5% Renewable energy purchase for FY 2009-10, it envisaged that such target will increase by 1% for next 10 years. The announcement of NAPCC program in 2008 meant quantum jump in deployment of Renewable en - ergy across the country, to promote investment in Renewable sector both Regulatory and Market driven approach became a necessity. Thus, strong policy measures and proactive regu- latory frameworks were required, if desired level of penetration of Renewable energy was to be achieved. One such policy instrument prescribed in NAPCC is Renew - able Energy Certificate (REC) Mechanism which would enable large number of stakeholders to purchase Renewable energy in a cost effective manner. Although India is abundantly gifted with variety of Renewable energy sources, not all States are endowed with same level of Renewable energy sources. While some States have very high renewable energy potential, some States have very little renewable energy potential. The Electricity Act 2003 (EA 2003) stimulated the develop- ment of Renewable energy based power generation by man - dating State Electricity Regulatory Commissions (SERC) with the function of Renewable energy promotion within the State. Under EA 2003, the SERCs set targets for obligated entities viz., Distribution licensees, Open access consumers and Cap- tive power plants, to purchase certain percentage of their total power requirement from Renewable energy sources, this tar - get is termed as Renewable Purchase Obligation (RPO). How - ever, there are certain limitations in State specific approach when Renewable energy development strategies are to be deployed at national level. Regulatory Initiative It is in this context that the concept of REC mechanism intro - duced by Central Electricity Regulatory Commission (CERC) assumes significance. This concept sought to address the mismatch between availability of RE sources and the require - ment of the obligated entities to meet their RPO. Section 66 of the Electricity Act 2003, provides that the Ap - propriate Commission shall endeavour to promote the devel- opment of a market (including trading) in power in such man - ner as may be specified and shall be guided by the National Electricity Policy. The CERC first issued the Draft Regulation on Terms and Conditions for recognition and issuance of Re - newable Energy Certificate (REC) for Renewable Energy Gen - eration in 2009. After concluding the stakeholder consultation process, the CERC (Terms and conditions for recognition and issuance of Renewable Energy Certificate for Renewable En - ergy Generation) Regulations 2010 was notified on 14th Jan - uary 2010. The salient features of the Regulation were: a) RECs shall be of two types i.e. solar and non-solar. The pur - chase of RECs shall be utilised for meeting the yearly RPO target of respective type. The Ministry of Power has set the Renewable energy purchase target to 21% by FY 2021-22 to be contributed equally at 10.5% each from Solar and Non Solar based sources b) RECs shall be issued by the Nodal Agency i.e. NLDC after the Renewable energy plants completes the registration and accreditation process c) RECs shall represent one Megawatt hour of electricity gen - erated from Renewable source and injected into the grid (i.e. 1 REC = 1 MWh) d) RECs shall be valid for a period of 365 days from the date of issuance. The validity was later increased to 1,065 days through subse- quent amendments e) RECs shall be transacted within the Forbearance and Floor price to be notified by CERC 56 energetica INDIA- May_2020 Prabhajit Kumar Sarkar Managing Director & CEO, Power Exchange India Limited (PXIL)