REC are they relevant anymore???

The Electricity Act 2003, entrusts the appropriate commission with the promotion of co-generation and generation based on renewable energy sources. As on July 31st 2009, the renewable energy sources constituted only about 8.5% of the total generation capacity in the country. The NAPCC had set the target of 5% renewable energy purchase for FY 2009-10 which will increase by 1% for next 10 years.

However, availability of renewable energy sources across different parts of the country was envisaged as a key impediment in exploring country’s renewable energy potential. Further, the high cost of generation from RE Sources discouraged the local distribution licensees from purchasing non-conventional power beyond the RPO level mandated by the State Commission. So, on one side, some states were not able to buy because there was no source, the resource rich states were limiting their RE generation to specific levels, thereby leading to double damage to the growth of renewable energy sources in the country.

The Renewable Energy Certificate Mechanism was brought in action to address this mismatch between availability of RE sources and requirement of the obligated entities to meet their RPO.

Question that we need to ask ourselves are whether the mechanism was up to the task & how relevant it is in a scenario where renewable prices have touched new low and distributed generation is being seen in new light??

More than 16 million RECs are lying safely in the REC inventory waiting to be redeemed, but the buyers are not interested in buying more than a few two – three lacs every month. Absence of strict implementation measures and carry forward of RPO targets by regulatory commissions in case of obligated entities (mainly DISCOMs) defaults has further impacted the viability of REC mechanism.

rec overview chart

Source: RECRegistryIndia.nic.in

The cost efficiency for RE generation is increasing in the market more people are jumping in like a flock of buffaloes As a matter of fact, the number of RECs claimed every month is increasing exponentially. Every month more than 7 Lac RECs are being claimed by RE generators Pan-India. Today, more than 2000 green generators are registered under the REC mechanism and many more are being added every month. Are there enough buyers to consume the RECs generated every month? A mechanism developed with such nobilities has somehow failed to implement the goodwill entrusted to it.

So, where is such one-sided toothless mechanism heading and what will happen of the new RE generators joining it at this stage?.

A mechanism constructed to strengthen the renewable energy procurement scenario and long term sustainability of the country is dwindling and is on the verge of collapsing under its own weight. I believe it’s time for the government to have a reality check.

Author:- Mayank Devmurarjee

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