21 lakh renewable energy certificates lie unsold with project developers

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                                                                                                The market for green certificates issued to developers, has collapsed alarmingly, casting a shadow on India’s ambitious plan for solar, wind and small hydro projects.Until a year ago, it seemed a seller’s market in state-promoted Renewable Energy Certificates (REC) as power distribution companies in states were asked to buy 5%-10% of their electricity from renewable sources or buy RECs instead. Project developers are granted one certificate for every 1,000 units of electricity generated from renewable sources.Today, developers have accumulated 21 lakh certificates which nobody wants to buy. Last month, they have been able to sell barely 2% of the certificates, and concerns are mounting as RECs have a shelf life of only two years. The market for the certificates has crashed due to oversupply. “The availability of RECs has increased to more than 20 lakh and this would increase further in the coming months,” Power Exchange India head MG Raoot said. Unsold RECs will start lapsing if project developers cannot find buyers by September.

    “Renewable purchase obligation is part of the Electricity Act itself and regulator has to decide its quantum from time to time. Non-compliance of this obligation will jeopardise investments in renewable sector”

The REC mechanism, launched in November 2010, has given developers Rs 743 crore from sale of certificates up to March 31, 2013, but the demand is falling rapidly. In the last trading session, prices of solar certificates slumped to record low of Rs 11,490 from Rs 12,206 in the previous session. For the first time, there were more sellers than buyers.REC will touch its floor price of Rs 9,300 in coming sessions. According to an energy exchange executive, it makes more sense for discoms to buy solar power at Rs 6-8 per unit instead of REC solar for Rs 9.30. This anomaly is distorting REC market.For 10th consecutive month, price for RECs issued for other renewable projects (wind, geothermal and biomass) failed to rise from its floor price of Rs 1,500 due to poor response from discoms and captive power plants. They bought only 18,500 non-solar RECs from 12,80,500 on offer. In view of the poor market, IEX is offering even monetory incentives to the buyers. “REC market cannot take off without active participation of discoms. The regulators should ensure that they meet their RPO.

                                                 A top official of one of the discoms in Western India said, “We are trying to meet RPO through our own PPAs. For balance, we will buy REC once the outcome of various petitions before the Appellate is clear. Also, REC prices are coming down and we are in no hurry to participate.” Indian Captive Power Producers Association secretary Rajiv Agrawal said, “We are concerned about reliable power supply and we are unable to get consistent coal supplies. In a struggle to meet basic power requirements, CPPs have put their RPO on backburne.

Reference: Economic Times & IEX.

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