As part of the plan in works, the union power ministry has circulated a discussion paper for redesigning the REC mechanism, that presently calls for renewable purchase obligations or RPOs to provide incentives to green energy sources.
“Discussion paper on the requirement of redesigning the REC Mechanism has been prepared in order to align it with the emerging changes in power scenario and to promote new renewable technology,” power ministry said in a statement on Monday.
The Central Electricity Regulatory Commission, India’s apex power sector regulator, operationalized the RPO mechanism with the move being supplemented by tradable RECs. In the event of a state being unable to match its RPOs, it buys RECs from a power exchange.
Some of the proposed features are; “The REC validity period may be removed. Thus, the validity of REC would be perpetual ie till it is sold.”
Such a mechanism provides a safety net for renewable power developers by guaranteeing the purchase of electricity, making these projects much more bankable.
“As RECs are perpetually valid then the floor and forbearance prices are not required to be specified as RECs holders would have the complete freedom to decide the timings to sell,” the proposal said. “CERC will be required to have monitoring and the surveillance mechanism to ensure that there is no hording of the RECs and creation of artificial price rise in the REC market. CERC may intervene if such case of malpractices is observed in the REC trading.”
India is running the world’s largest clean energy programme to achieve 175 GW of renewable capacity, including 100GW of solar power and 60 GW of wind power by 2022. A lot is riding on these projects to help India meet its climate change commitments.
“The RE generator who are eligible for REC, will be eligible for issuance of RECs for 15 years from the date of commissioning of the projects. The existing RE project that are eligible for REC would continue to get RECs for 25 years,” the statement said and added, “Promotion of new and high-cost technologies in RE and the provision of multiplier for issuance of RECs.”
India has set a target of 450GW renewable energy capacity by 2030. It currently has an installed renewable energy capacity of 89.63GW, with 49.59GW under execution. Also, ₹ 4.7 trillion has been invested in the country’s renewable energy space in the past six years, with an expected ₹ 1 trillion investment opportunity annually till 2030.
“A technology multiplier can be introduced for promotion of new and high priced RE technologies, which can be allocated in various baskets specific to technologies depending on maturity. The multiplier would also take care of vintage depending on the date of commissioning of the project,” the statement said.