Time to renew commitments to green energy
Ten years back, India came up with a landmark new legislative framework. It assigned electricity regulators in the States with powers to define a certain percentage of the energy supply mix to come from renewable sources.
The regulated electricity distribution companies were to follow such directions from their respective regulators, revised from time to time.
The efforts did not stop there. In 2008, recognising the importance of dealing with climate change issues associated with rapid economic growth, the Centre came up with the National Action Plan on Climate Change.
This entailed setting a target of 15 per cent of electricity production from renewable sources. Due to local availability and technical constraints in transfer of renewable energy-based power over long distances, the need was felt for a market-based mechanism which would help consume this locally.
This triggered the idea of establishing the Renewable Energy Certificates (RECs) mechanism for pushing renewable energy sales in the regulated market. A well-designed REC market came into being; the necessary model regulations were drawn up by the Central Electricity Regulatory Commission (CERC) in 2010 to govern the activity. Several State regulators came out with their own State-specific REC regulations. Though a little complicated in nature and process, the design and functioning of the REC mechanism was initially viewed by many experts as satisfactory.
However, of late, the efficacy of the REC mechanism, in the wake of declining REC sales in the two power exchanges, has been debated by experts. The last several trading sessions have witnessed a very poor response from REC buyers (mainly the obligated entities).