Regulatory Challenges For Renewable Energy Certificates
The Indian Ratings and Research (Ind-Ra) announced today that the renewable energy certificates will continue to face regulatory challenges and stated that the obligated entities may prefer to buy clean energy directly instead.
“The obligated entities may prefer to continue to buy renewable power directly rather than using renewable energy certificates (DECs), to comply with their renewable power obligations,” an India Ratings and Research statement said.
The Ind-Ra believes that the uncertainties in trading DECs will stay as a result of the Regulatory Commission’s (CERC) decision to reduce the floor and ceiling price of solar and non-solar RECs in March 2017 which has also affected the Solar REC trading.
In April this year, the Appellate Tribunal of Electricity (APTEL) upheld CERC’s decision, resulting in the floor and ceiling prices of RECs, which is determined by the CERC methodology and usually reflects the price discovered through renewable power reverse bids.
It said that trading volume in solar renewable energy certificates (RECs) had declined over 70% year on year on account of the stay on solar REC trading in May 2017. The trading has been restarted from April 2018, only after APTEL upheld CERC’s order. Furthermore, the stay order on trading non-solar RECs was lifted in July 2017 on the appeal of Indian Wind Power Association. This led to a 70% increase in win Power REC’s.
The increasing renewable energy penetration, excluding large-scale hydropower projects into the Indian grid system (12% in FY12 to 19% in FY18 of all India installed power capacity) and lower non-compliance of renewable purchase obligations by state utilities have been the major reasons for lower/stagnant REC trading at power exchanges, as per the statement released by Ind-Ra.
During April-May 2018, both solar and non-solar RECs traded at the new floor prices and the Ind-Ra expects the demand-supply mismatch for RECs to remain.
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