The Central Electricity Regulatory Commission(CERC) recently issued a draft order regarding the revision of floor & forbearance price of the Renewable Energy Certificates (RECs). 

In line with the Electricity Act 2003 Renewable Purchase Obligation, RECs were introduced as tradable market instruments which are considered to be equivalent to Solar and Non-Solar Power. Accordingly, prices are determined based on various market factors in the present scenario and therefore CERC considers the association of RECs with the market very important in order for smooth operations of the REC mechanism. 

 As it is known that the renewable energy scenario in the country has undergone a massive change in the past few years. Having said that the tariffs of the renewable energy plants have also declined drastically and with that, the supply-demand curve has also changed. A major reason is competitive bidding in the wind and solar project awarding process. Below stated is the floor & forbearance price trend for solar & non-solar since 2012.  The price trend of REC highly depends on the tariff discovery of the RE plants, which has reduced drastically since 2017. The latest competitive bidding results discovery was of INR 2.74/kWh for solar and INR 2.51/kWh for wind plants respectively.

Hence, CERC has proposed a new Floor and forbearance price under the REC regulations. New prices have been proposed based on the various competitive bidding tariffs discovered from April 2017 to March 2020. 

In continuation, it is also proposed that the forbearance price and floor price will be applicable to RECs issued after 01.04.2017. For Solar RECs issued before 01.04.2017, the eligible entities will be allowed to either go ahead with the revised forbearance price and floor price or to continue with the Order dated 30.03.2017 in Petition No. 02/SM/2017. Whereas for Non-solar RECs issued prior to 01.04.2017, the trading shall take place in accordance with the Commission’s letter dated 28.05.2018.

The graph below shows the floor and forbearance price since the inception of the REC mechanism.* Revised Floor & Forbearance REC price to be applicable only after the commission notifies it in the gazette

All the stakeholders can send in their comments, suggestions and opinions till 20th April 2020 before the commission takes a final decision on the matter.