Renewable Energy Certificate (REC)

Why in news?

• Union Minister of Power and New & Renewable Energy, Shri RK Singh has given his assent to amendments in the existing Renewable Energy Certificate (REC)  mechanism.
• The intent behind this decision is to align the mechanism with the emerging changes in the power scenario and also to promote new renewable technologies.

Objective of Renewable Energy Certificate (REC) mechanism:

• Renewable Energy Certificate (REC) mechanism is a market based instrument to promote renewable energy and facilitate compliance of renewable purchase obligations (RPO).
• It is aimed at addressing the mismatch between availability of RE resources in state and the requirement of the obligated entities to meet the renewable purchase obligation (RPO).

What is Renewable Purchase Obligation (RPO)?

• RPO is an obligation imposed on certain entitles (power distribution companies, captive power plants and other large electricity consumers) to purchase energy from renewable sources by various state electricity regulatory commissions (SERCs) based on each state’s varying renewable energy potentials.
• RPO was instituted in 2010  under the Electricity Act, 2003

What is the denomination of each REC issued?

• One Renewable Energy Certificate (REC) is treated as equivalent to 1 MWh.

How many types of RECs are there?

• There are two categories of RECs, viz., solar RECs and non-solar RECs.
• Solar RECs are issued to eligible entities for generation of electricity based on solar as renewable energy source, and non-solar RECs are issued to eligible entities for generation of electricity based on renewable energy sources other than solar.
• The solar certificate shall be sold to the obligated entities to enable them to meet their renewable purchase obligation for solar, and non-solar certificate shall be sold to the obligated entities to enable them to meet their obligation for purchase from renewable energy sources other than solar.

Which RE technologies are eligible for REC?

• Grid connected RE Technologies approved by MNRE would be eligible under this scheme.

Where RECs would be traded?

• REC would be exchanged only in the Central Electricity Regulatory Commission (CERC) approved power exchanges.
• Currently, RECs are traded on two power exchanges — Indian Energy Exchange (IEX) and Power Exchange of India (PXIL).

What would be the price of one REC?

• The price of REC would be determined in power exchange.
• REC would be traded in power exchange within the forbearance price and floor price determined by Central Electricity Regulatory Commission (CERC) from time to time.

Add ons:

• The salient features of changes proposed in revamped REC mechanism are:
  • Validity of REC would be perpetual i.e., till it is sold.
  • Floor and forbearance prices are not required to be specified.
  • CERC to have monitoring and the surveillance mechanism to ensure that there is no hoarding of RECs.
  • No REC to be issued to the beneficiary of subsidies/concessions or waiver of any other charges.

PRACTICE QUESTION:

With reference to ‘Renewable Energy Certificate (REC) mechanism’, consider the following statements:

1. It is a market based instrument to promote renewable energy

2. REC would be exchanged only in the Central Electricity Regulatory Commission (CERC) approved power exchanges.

Which of the statements given above is/are correct?

(a) 1 only

(b) 2 only

(c) Both 1 and 2

(d) Neither 1 nor 2

Answer