REC Policy Needs Immediate Government Interventions in Order to Boost Solar Projects in Country

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The REC Mechanism based projects are finding tough to survive, as in past months the RECs traded in October were about 15 Lac while RECs were available for the same, however only 2.2 Lac have been redeemed similarly is the case of non-solar RECs

The graphs given below clearly shows the dynamics of REC (solar and non-solar RECs) markets

Solar REC

Source: IEX

Solar RECs shows a downward trend in the clearing price after increase in the price up to November 2012. The graph shows increase in the difference of Buy Bids and Sell Bids, as there is increase in Buy Bids there is decrease in Sell Bids.

Non Solar REC

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Source: IEX

Non Solar RECs shows a decreasing trend in the cleared volume of Bids and then a slight increase as December approaches. Non solar RECs were cleared at the price of Rs 1500/REC from Sept to Dec 2012.

The RECs will lapse in March and the obligatory agencies, such as Discoms are yet to come forward to buy RECs to meet their RPO Obligations. Recently NLDC, IEX and PXIL have filed petition to CERC for immediate interventions so that CERC can take immediate interventions to extend the validity period of RECs. There are various ways in which the government can extend clarity in its REC regulations which are as follows

  1. The lack of clarity of REC related beyond 2017: Announcing five year targets do not help the project developer to get financing, there is a need to announce REC targets and obligations at least for 10 years period. As REC rates are primarily representing viability gap the rates for 10 years can be announced in the form of levellised rate of REC with the floor and forbearance price.
  2. The impact of REC / RPO Obligation on Discoms is not more than 15 – 20 paisa / kWh in in terms of overall tariff. It is proposed that the Discoms are allowed to charge Renewable cess of Rs 0.15 / unit which will generate enough revenue for them to purchase RECs and promote the Renewable projects without burdening heavily the consumers
  3. While there is slight down in the prices of solar projects the floor and forbearance price of RECs need to be changed  taking into consideration the other benefits such as freewheeling banking charges, subsidies T&D charges etc for the projects under REC route.
  4. As RECs are issued on monthly basis the Discoms targets should also be fixed on monthly basis so that the continuous track of monthly RPO fulfilment can be ensured. The current mechanism allows the Discoms to fulfil its obligation in the year end i.e. in March and maximum trading takes place in the FY end. This does not provide regular revenue to the project investors.
  5. REC mechanism does not take into consideration to the investors who wish to install off grid systems / Roof top systems (RTS) of smaller capacity. It is proposed that off grid / grid connected RTS should be brought in the purview of RPO compliance of Discom so that individual Roof top owner can own the roof top solar projects and can avail REC benefits.
  6. The RPO obligation is also applicable on the captive / open access consumers having 1 MW and above capacity however there is no enforcement of RPO on these categories of consumers if government can enforce seriously The RPO obligation on this category as well then the faith of investors in renewable can be maintained otherwise eth whole REC mechanism van lead to as flop show.

CERC is having a hearing on 15th Jan 2013 in this regards and it is expected that there will be more clarity ion the RPO enforcement and RC trading to revive the renewable investment in the country

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