‘Delayed regulations surrounding solar RECs in India could jeopardize the financial viability of projects in this market’ REVEALS LATEST ANALYSIS
September 20th 2012, New Delhi
According to a report on ‘The REC Mechanism: Viability of solar projects in India’, regulations or the lack of them thereof, are clouding the solar renewable energy certificate (REC) market from taking off. In BRIDGE TO INDIA’s assessment, every month of delay in the announcement of such regulations is jeopardizing the viability of REC mechanism based solar projects in India.
Even though the solar REC market has been largely inactive so far, BRIDGE TO INDIA’s analysis suggests that the market has the potential to reach substantial trade volumes – 480 million RECs by 2016. According to the report, the weakest link in executing this model currently is the absence of clear regulations on connectivity and metering. The Central Electricity Regulatory Commission is actively tabling these regulations. However, the window period (2012-2017) for the REC floor and forbearance prices is running out – guaranteed only until March 2017. According to BRIDGE TO INDIA, therefore, every month’s delay in announcing these regulations will seriously jeopardize the financial viability of REC projects.
According to the report, financing of REC projects is another weak link especially because Indian banks continue to remain wary of the REC mechanism. “The market will start with smaller kilo-watt scale projects being fully leveraged (100% equity). Once sufficient data is available from the REC market and a proof of concept is established through working models, this situation is likely to change. Banks currently prefer a wait-and-watch approach to take a call on the REC mechanism” says Mr. Akhilesh Magal, head of Project Development at BRIDGE TO INDIA.