Under what circumstances solar RECs can remain untraded?
The above situation can arise in following situations:
- The state utilities (Distribution Licensees) do not meet their respective Solar RPO targets.
- The Distribution Licensees meet their targets through preferencial tariff option (Feed in Tariff) for solar and do not find any need for the Solar RPO
- 3. The obligation for RPO is also on the captive generator over 1 MW capacity. The above situation may arise that the captive generators also do not fulfil their RPO compliance.
Please note that all the above situations are part of regulatory non compliance and the parties affected through the regulatory non compliance may approach to the regulator for providing them alternative tariff in the event of non tradability of Solar RECs.
Also please note that some of the states such as Delhi, etc who do not have enough space to put up solar will always be in demand ofSolar RECs to fulfil their RPO compliance.
As on date there is a demand of RECs and there is a lack of supply as many plants have not yet come up under this scheme. While there is a regulatory risk of non tradability of RECs in above scenarios, it also gives you upside in your profits.
The present guideline on REC non compliance is as follows:
“If an obligated entity does not fulfil the renewable purchase obligation as provided in these Regulations during any year and also does not purchase the certificates, the Commission may direct the obligated entity to deposit into a separate fund, to be created and maintained by such obligated entity, such amount as the Commission may determine on the basis of the shortfall in units of RPO and the forbearance price decided by the Central Commission”:
The above guideline is by GERC.
The summary is more risk more profits, less risk less profits. Choice is yours.
If you want any further clarification feel free to contact us