Order in the case of REC pricing and vintage multiplier has now been uploaded on the ApTel’s website. Following is a quick summary of the same:
ApTel has rejected all prayers of the RE generators. Specifically, it has held:
-       Pricing: ApTel found no issues with the change in methodology by CERC when they used bid-discovered prices as against CERC determined generic tariffs.
The order states: “
“In view of the growing competition and induction of latest technologies, more and more generators are participating in the auctions/bids with considerable reduced cost of generation. Thus, the Central Commission in specifying REC prices, has shifted to bid discovered prices in place of earlier generic tariff fixed by it when the RE sector specially solar was in infancy stage.”
“We have carefully considered the contentions of all the parties and note that under the prevailing market scenario, the prices of RECs cannot be kept artificially high to burden the end consumers. Further, if the prices of RECs are kept high without aligning them with the market reality and current cost of electricity, the obligated entities may not purchase the RECs and try to fulfil their RPOs by other means.”
-       Vintage Multiplier – The ApTel has said that providing vintage multiplier is the “discretion” of CERC, and said that the CERC has provided “cogent reasoning” in its order, and further that the ApTel found “no unjustness in specifying the floor and forbearance prices of REC and discontinuation of the Vintage Multiplier”

-       In our opinion, the justification of price reduction is also to some extent based on factually incorrect premise. For example, the order says:
It is also noteworthy that sufficient time has been given to RE generators to sell their RECs at the power exchange but perhaps in anticipation of selling them at better prices has resulted into unsold REC inventory.”
            And further,
“Another important fact is that among the three routes available for RE generators, the REC capacity is dominated by RE generators operating under CGP and OA route rendering APPC route as the last choice”
We believe that this order will have a significant adverse impact on projects and investors that have invested in REC projects. An immediate impact will be that such project will have to bear heavy losses on the existing inventory of RECs – the losses will be particularly heavy for solar projects.
It also does not bode well for future investment in the REC mechanism, as falling RE prices are an irreversible trend. Does this mean that REC projects will have to bear losses of such reduction every year?


After the Central Electricity Regulatory Commission’s (CERC) order dated 30th March 2017 on reduction of prices for RECs, many REC-generating companies had filed petitions stating that they had incurred a loss as vintage multiplier was not provided. They had first gone to Appellate Tribunal of Electricity (APTEL) to suggest a way to clear the existing REC stock. While the APTEL agreed to introduce a vintage multiplier, it refused to put a stay on the trading.  When the petition was taken to the supreme court, it not only put a stay on the trading, it has also stayed the new price regime which was introduced by the CERC.


The Business Standard article covering the same can be accessed here.

Our blog covering the reduction in the REC prices and our analysis of the same can be accessed here.



  • The Honorable CERC published the final order on revised price bands for RECs which will be valid from April 1, 2017 onwards.

  • The new floor and forbearance prices are given below


  • This represents a drastic reduction of 71% for Solar RECs, and 33% for non-solar RECs

  • Existing inventory of RECs will not be given vintage multiplier

  • RECs that were at the verge of expiry have been given an extension
Impact on the market:

Immediate impact:

  • Overall, existing RECs projects will take a loss of Rs 1,866 crore due to reduction in the value of existing REC inventory. This represents roughly 50% of the total value of RECs. With such a significant loss, it is likely that several projects will become NPAs.

  • Reduced trading in March 31 trade session – generally, the March trading session sees high trading volumes as it is the last trading session of the compliance period. However, with the prospect of significant saving by trading in April, many obligated entities are likely to postpone trading to the next month.

Infact, this has been acknowledged and even allowed by a state regulator. See relevant order for allowing postponing of trading to an obligated entity here –


Long-term impact:

  • Potential (marginal) higher demand going forward – RECs prices have come down to such an extent that most captive and open access based consumers are likely to find buying RECs cheaper way of meeting RPO than buying green power. This may also apply in the case of several Discom’s, particularly in states that are power surplus. These low prices may therefore result in increase in demand of RECs.

However, it must be kept in mind that REC price reduction is always beneficial to the Obligated entities which are non-compliant as they will have an option to purchase RECs and fulfill their RPO compliance at lower prices whereas Obligated Entities who have been regularly meeting their RPO compliance will have incurred significantly higher cost. Therefore, a regularly reducing floor price actually incentivises postponing purchase of RECs, rather than meeting RPO.

Without strict enforcement and any risk of penalty, Obligated entities still have no incentive to comply. We believe that RECs demand will increase, but only to a very limited extent, as most obligated entities still don’t face any reason to comply with RPO at all.

The previous order can be accessed here and our analysis of the same can be found here.

CERC: REC Regulation 3rd Amendment

We are pleased to inform that Hon’ble CERC has finalized a much awaited 3rd Amendment on REC Mechanism. The Central Commission has laid out following changes through this legislation/order:

REC Regulation (3rd Amendment) | Order on Vintage Multipler |  Statement of Objects & Reasons

DISCOMs to get RECs for surplus green power they would have procured. However, this is applicable only if such DISCOM has procured green power over and above RPO target set under NAPCC or National Tariff Policy or by Appropriate Commission WHICHEVER IS HIGHER. Further, before granting RECs for surplus green power, any shortfall in RPO or any carry forward in RPO granted by Commission in PREVIOUS THREE YEARs would be adjusted first before issuance of RECs to such DISCOM. Provided further, such DISCOM would need permission from appropriate commission to procure such green power.

Implications: This provision clearly brings clear incentives for DISCOM having procured higher amount of green power beyond their RPO targets. However, since the proviso brings forth conditionality of “higher of NAPCC, Tariff Policy or State Commission mandated RPO target”, DISCOM would have to align themselves first with all the three RPO targets. We can say that the Center would now have a greater say in directing RPO trajectory which was missing so far.

Pre-Term reduction in Solar Floor/Forbearance Price. The new Floor price now stands at Rs.3500/MWh and Forbearance Price at Rs.5800/MWh.

Vintage Multiplier for Solar RECs has been introduced. Solar projects registered under REC Mechanism after 1st Jan, 2015 would get 1 REC for every MWh of generation. Projects registered before that would get 2.66 RECs for every MWh of energy.

Implications: This proviso brings clear divide between projects that are already registered and projects which would get registered under REC mechanism from today onwards. Since the reduction of REC price would bring additional demand, the sudden spike in supply of REC would again result into subdued/depressed clearance ratio of Solar RECs.

With the current inventory of 5.8 Lac RECs available, we can expect the inventory to shoot to about 15.5 Lac Solar RECs immediately. Further, with 538 MW Solar PV capacity already registered under REC, the inventory pile up can increase rapidly given the multiplier effect.

Differential treatment of Captive/CGP and OA based REC generator has been kept in abeyance.  Hon’ble commission has kept the decision to grant reduced number of RECs to OA/Captive based REC Generator in ABEYANCE and has directed staff to come up with a fresh discussion paper to accommodate the same.

The Hindu Business Line quoted – “ The CERC notification lowering the price band is significant because the previous band did not serve any purpose. Even the floor price (Rs 9,300 per REC) was very high. Since one REC is issued for every megawatt-hour of electricity generated, the floor price translated to Rs 9.30 per unit of solar power. Nobody would buy an REC at this price because any obligated entity would find it cheaper to buy solar energy, which is now available at between Rs 6 and Rs 7 a unit, rather than buy a solar REC paying Rs 9.30. The solar industry had been clamoring for a downward revision of the band”. The same can be read in the media article here.

Regulation (Suo Motu Order), Notification and Statement of Reasons can be accessed.

The same has been mentioned in a media article here.


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