No more REC for renewable captives?

This could very soon be true going by the draft ammendments of the  terms and conditions for the issuance of REC for renewable generators.

CERC had notified the “Terms and Conditions for recognition and issuance of Renewable Energy Certificate for Renewable Energy Generation” Regulations, 2010, aimed at drawing more investment into the Renewable Energy projects and also to provide alternate means for RE generators to recover their costs. With the introduction of REC mechanism, trading of REC began in the power exchanges by 2011. Since then there has been a rapid increase in the RECs available in the market, however, there hasn’t been much increase in the demand for these RECs. This gap has been largely attributed to the lack of proper enforcement of the RPO by the commissions. Also a majority of the REC inventory is contributed by the captive generating plants.

The commission has thus sought for the examination of the following issues:

  •        Review eligibility of issuance of Certificates to RE based Captive Generating Plant (CGP).
  •        Review eligibility of issuance of Certificates to the renewable energy generators selling electricity component to third party through open access.

In the matters of issuance of certificates to RE based captive generating plants, the stakeholders are of the view that the CGP are adequately compensated on account of tariff savings as they need not procure from the discoms. Also the net electricity component realization by the CGP is greater than major renewable energy generators in many states even without REC benefit. Also the CGP has added benefit of being shielded from credit risk, and the risk of termination of PPAs as the generation is primarily for self-consumption. It was found that withdrawing these benefits to CGP would not adversely affect on investments or require a reversal of the policy. Based on these considerations it has been proposed to amend regulation 5 of which would now deny issuance of RECs to CGPs based on renewable energy.

While in matters concerning the issuance of Certificates to the renewable energy generators selling electricity component to third party through open access. Various arguments were made in this regard that those selling electricity component through open access route have been set up after the introduction of REC framework, and hence have received financing considering projected revenue from both electricity sale and REC sale. Thus it was decided that it would not be preferable to make changes to  present dispensation of 1 REC for 1 MWh, which would make projects unviable and adversely affect future investments.

On the issue of of concessional benefits for RE generator selling through OA in the form of concessional wheeling or transmission charges, banking facility benefit or concessional cross subsidy surcharge, it was decided argued that REC mechanism approach was aimed at promoting competition. Thus it is proposed that renewable energy generating plant selling electricity through Open Access and availing the concessional benefits in the form of transmission or wheeling charges and/or the banking facility benefit or concessional cross subsidy charge shall be required to forego such benefits for the purpose of availing renewable energy certificate for energy generated.

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