The power ministry announced redesigning of the Renewable Energy Certificate (REC) mechanism, which would pave the way for removal of floor as well as forbearance price limits for these instruments.

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.

What is Renewable Energy Certificate (REC) mechanism?

• Renewable Energy Certificate (REC) mechanism was introduced in 2010. 

• 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 renewable energy (RE) resources in the state and the requirement of the obligated entities to meet the renewable purchase obligation (RPO).

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

There are two categories of RECs:

1) Solar RECs are issued to eligible entities for generation of electricity based on solar as a renewable energy source.

2) Non-solar RECs are issued to eligible entities for generation of electricity based on renewable energy sources other than solar.

• 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. 

What are the amendments to the mechanism?

• Union Minister R.K. Singh has given his assent to amendments in the existing REC  mechanism. 

• The changes will provide some flexibility to the players, additional avenues, rationalisation and also address the REC’s validity period uncertainty issues.

• Under the redesigned mechanism, the validity of the REC would be perpetual, that is till it is sold.

• Besides, the floor and forbearance (maximum) prices are not required to be specified.

• The CERC will have a monitoring and surveillance mechanism to ensure that there is no hoarding of RECs.

• The renewable energy (RE) generators eligible for RECs will be eligible for the period of the power purchase agreement (PPA) as per the prevailing guidelines.

• The existing RE projects that are eligible for RECs would continue to get them for 25 years.

• 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 RECs can be issued to obligated entities (including discoms and open access consumers) which purchase RE power beyond their renewable purchase obligation (RPO) compliance notified by the Centre.

• No REC will be issued to the beneficiary of subsidies/concessions or waiver of any other charges. The FOR (Forum of Regulators) will define concessional charges uniformly for denying the RECs.

• It will also allow traders and bilateral transactions in the REC mechanism.

• The changes proposed in the revamped REC mechanism will be implemented by the CERC.

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