New mechanism to improve viability of renewable energy

Written by Sanjay Jog | Mumbai | Updated: Feb 13 2009, 05:02am hrs
The task force on renewable energy certificate (REC) mechannism, headed by the Central Electricity Regulatory Commission (CERC) chairman Pramod Deo, will finalise REC mechannism and evolve model regulations for state electricity regulatory commission (SERCs) to adopt and implement REC mechanism.

REC mechanisms such as denomination of REC, eligible technologies, eligible renewable energy generators, pricing methodology for both the electricity component and renewable energy component, structure the operational mechanism for certification of REC, REC registry, will be finalised.

CERC chairman Pramod Deo told FE, The task force has been formed after the working group of forum of regulators recommended that a suitable mechanism like REC is necessary to promote renewable energy sources on the skill envisaged in the National Action Plan on Climate Change. Ministry of new and renewable energy had appointed a consultant for examination and conceptualisation of REC mechanism. The consultant made a presentation in the meeting of forum held on 30th January, 2009 in Chennai. The presentation brought out the relevant features of the National Action Plan for Climate Change, the objectives and main features of the proposed REC mechanism and the proposal for developing a national level REC framework.

Deo said REC mechanisms enable market growth and improve the commercial viability of the RE electricity. REC measures can provide a greater push to RE electricity by way of removing the bottlenecks like higher costs, uneven distribution of RE resources across India, and scheduling or despatchability of RE electricity, in procurement of RE electricity by utilities. RECs mechanisms merit considerations, and has been used extensively as a successful market based policy instrument to promote renewables in many countries. Sources said that RE generators already having power purchase agreements (PPAs) with distribution licensees for contracted quantum would not have option to participate in REC mechanism till the validity of respective PPAs.

New RE generators would have two options - selling both the electricity component and REC component together at preferential tariffs determined by the respective SERC or selling only the electricity component to distribution utilities and selling the REC component through market mechanism.

Moreover, sale of RECs has to be mandatorily through a transparent market-based trading mechanism. Further work is required in the area of pricing the electricity component by the SERCs.

The issue of regulatory jurisdiction on purchase of electricity beyond renewable purchase obligation also needed to be further examined.