Power regulators to decide fate of renewable energy certificate on Sep 4

Written by Sanjay Jog | Mumbai | Updated: Aug 28 2009, 05:44am hrs
The forum of power regulators will decide the fate of implementation of renewable energy certificate (REC) at its meeting slated for September 4. This will give a much-needed boost to attract more investors in RE (renewable energy) business. At present, around 14,000 mw of RE is installed in the country comprising as high as 10,000 mw of wind power mostly confined to Tamil Nadu and Rajasthan and the balance 4,000 mw is of micro hydel, co-generation, solar and bio mass plants.

Central Electricity Regulatory Commission (CERC) chairman Pramod Deo told FE on Wednesday CERC has already prepared draft regulations to give effect to the REC implementation framework. The power regulator evolved model regulation for state electricity regulatory commission (SERC) under the section 86 (1) (e) of the Act and a regulation under the Section 61, 66 and 178 of the Electricity Act, 2003.

Sources said that the Forum was of the view 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 of 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 mandatory through a transparent market based trading mechanism. Further work is required in the area of pricing the electricity component by SERCs.

According to model regulations, SERC would define obligated entities and minimum percentage of electricity procurement from renewable sources under mandatory for obligated entities. SERC would recognise REC as the valid instrument for the discharge of the mandatory obligations set out in the regulations.

State nodal agency (SNA) would accord accreditation to the RE projects eligible under REC mechanism. On enforcement mechanism, CERC norm says that in the event of default obligated entities would be directed to deposit the amount required for purchase of REC shortfall at forbearance price (maximum price) of REC in a separate fund, which cannot be utilised without approval of the SERC. In addition to this enforcement mechanism the penalty under section 142 of the Electricity Act, 2003 would also be applicable to the obligated entity.

Further, CERC would appoint Compliance Auditor for post-monitoring of the REC transactions. Power exchanges approved by CERC would be eligible exchange platforms for REC exchange. RE generators are not allowed to bank more than 25% of REC for the next year. RE generators selling electricity at a price would not exceed the pool cost of power purchase of concerned distribution licensee.