However, the prices started rising since then, trading at `2,000/REC in March and April this year.
The Central Electricity Regulatory Commission (CERC) has extended the validity of 1.2 lakh renewable energy certificates (RECs) which were scheduled to expire by October 31. These RECs will now be valid till December 31.
This development comes at a time when the prices of RECs are increasing with rising demand as states are gradually becoming more stringent about following renewable purchase obligation (RPO). Till September 2018, solar RECs were being traded at their minimum floor price of `1,000/REC. However, the prices started rising since then, trading at `2,000/REC in March and April this year.
RECs are an alternative market-based instrument to promote renewables and facilitate RPO compliance. RPO mandates that all electricity distribution licensees should purchase or produce a minimum specified quantity of their requirement from renewable energy sources. One REC is treated as equivalent to 1,000 units of green electricity. Out of the total installed grid connected renewable energy capacity of 77,642 MW, about 4,620 MW is accredited under the REC framework.
Though the first REC trading session was held in February 2011, low RPO compliance till 2015 kept the trading levels muted. Enforcement of RPO regulations picked up after the Supreme Court’s 2015 judgement, which reiterated that captive power plants and open access consumers are obliged to follow RPO norms. This increased demand for RECs, with buy-bids rising from 65 lakh RECs in FY17 to 1.8 crore in FY19, recording a growth of 175% and simultaneously rising their prices.
However, since not many new renewable energy plants are coming up under the REC framework, rising demand is taking a toll on REC inventory, which has dropped 58% since June 2018 to 23.2 lakh.