CERC to launch renewable energy trading certificate soon

Renewable generation in the country is set to get a major boost, with the Central Electricity Regulatory Commission (CERC) planning to launch power exchange-based trading of renewable energy certificates (RECs) soon. RECs will be issued to renewable power generators by national load despatch centre (NLDC) against power supplied to discoms at their average pool purchase cost. Discoms in renewable power-deficit states can buy these instruments against their renewable power purchase obligations (RPO).

Trading will create liquidity in the market and make cost economics of renewable power projects more attractive for financiers. "We are going to launch soon formal trading of RECs soon. We are currently in the process of finalising a date," CERC chairman Pramod Deo said.

Under the national action plan on climate change, India has envisaged meeting 15% of its electricity requirement from renewable sources by 2015.

Concerned state electricity regulatory commission (SERC) is mandated to decide quantum of RPO for states. A roadmap on RPO has already been envisaged for each state in the Forum of Regulators, which comprises chairpersons of all electricity regulatory commissions and headed by the CERC chairman.Since renewable power is costly, SERCs will look at factors like potential impact on electricity tariff the state and availability of renewable power while deciding quantum of RPO for the state.

The country's renewable power generation potential is concentrated in a few states like Rajasthan, Tmil Nadu and Karnataka. Renewable power accounts for a relatively high share of these states' electricity consumption. However, these states are not keen to take more renewable power as it is costly.

For example, Tamil Nadu already meets more than 10% of its electricity requirement from wind power projects but still has untapped potential to generate electricity from wind. On the other hand, there are states like Delhi and Bihar which have very little potential for generating renewable power but are required by the National Electricity Policy to enhance share of renewable electricity consumption.

To address this mismatch, the Forum of Regulators has evolved REC mechanism under which the renewable power is to be split into two components - electricity and the green attribute. The electricity component can be sold to local distribution utilities at a price of conventional electricity and the green attribute is converted into REC which the generator can sell to renewable power-deficit states like Delhi.