Renewable Energy Certificates Conclave 2010

Sep 10, 2010

Introduction

As the world governments prepare their carbon emissions markets, the Indian government has announced the launch of its largest Domestic Carbon Market Initiative – Renewable Energy Certificates. The mechanism could become the essence of a future carbon market and will redefine the renewable energy sector growth in India, by introducing flexibility and removing geographical barriers for promoting the Renewable Energy projects across the country.

With an expected market value of approximately INR 10,000 crores by 2012, RECs will be the largest incentive for the Indian Renewable Energy Investors. With an electronic platform to buy and sell RECs, this is one of the most transparent subsidy mechanisms put in place by the Indian government to incentivize clean energy investments. Also, with two revenue streams, viz., from electricity sale and REC mechanism, the Indian renewable energy industry will be one of the most lucrative investment destinations globally.

With a number of private investors keen on investing billions of dollars in Indian RE sector, Wind, Solar, Hydro and Biomass sectors, the REC mechanism is now an integral part in planning further investments.

About Renewable Energy Certificates (REC)

Promotion of Renewable Energy is a key criterion in the efforts undertaken to combat Climate Change. National Action plan for Climate Change (NAPCC) envisages increasing the share of renewable energy in total electricity consumption of the country. The target for renewable energy purchase for FY 2009-10 has been set as 5%. This target increases by 1% every year for the next 10 years. This implies that NAPCC envisages renewable energy to constitute approximately 15% of the energy mix of India in 2020. Considering the past pace of present growth of capacity addition growth of power generation from renewable sources and the trend in renewable energy purchase, a quantum jump in deployment of renewable energy across the country is required to achieve the targets set.

Renewable Energy Certificates (RECs) are one of such policy instrument prescribed in the plan. Through CERC press release on September 17, 2009, the Forum of Regulators announced its consent for introduction of the Renewable Energy Certificate Mechanism. It is anticipated that this mechanism would enable large number of stakeholders to purchase renewable energy in a cost effective manner.

Renewable Energy Certificates would shift the burden of subsidizing Renewable Energy from the government to the polluters, including DISCOMs, captive generators & OA consumers.

In India, the RECs will be issued for projects in the following sectors:

Biomass and Municipal Waste
Wind
Hydro and Geothermal
Bagasse Cogeneration
Solar

The Government has fixed price bands for RECs in each of these sectors. However, at market determined prices, the RECs are expected to increase the per unit revenues beyond the preferential tariffs offered by the government.

However, liquidity is a must in any mechanisms for it to become a success.

REC framework is developing exponentially as the government, the exchanges, the investors and consultants come together to establish rules, regulations, guidelines and market for the launch of RECs.

It is estimated that around projects of 200 MW capacity are already pipelined for REC issuances even before the launch of the REC market.

It is also estimated that around 25% of the new renewable energy capacity being commissioned next year will migrate to RECs rather than state determined tariffs. With a dynamic short term market developing in India, the RE developers may not be keen to be tied in PPAs for 21 years.

Topics to be Covered in Conclave