CERC: 3rd Amendment (Draft) to REC Mechanism
We are pleased to convey that hon’ble CERC has issued 3rd amendment on REC Mechanism. Key highlights of the same are summarized below:
- Eligibility Criteria
A) DISCOMs having met their previous year RPO can also claim RECs for surplus green power purchased.
- IMPACT: We can expect additional non-solar RECs from TN, HP and possibly from Karnataka. Gujarat is expected to benefit by the way of getting Solar RECs as installed capacity in Solar exceeds solar RPO targets.
- Open Access route for RE project may become tougher as DISCOMs now have an additional incentive to procure green power and claim certificates.
B) OA and CGP route to get reduced number of RECs:
- It’s proposed in the amendment that OA and CGP based RE generator to be given 0.5 REC for every 1 MWh of generation.
- IMPACT: The analysis in the draft paper suggests that as much as 65% of installed RE capacity under REC represents OA/CGP route. The % share in net REC number would be even higher as biomass and bagasse based REC project would operate at higher PLF. Hence, this would reduce the REC inventory at least by 40% w.r.t current issuance mark.
- A much awaited step to bring back buyers confidence in procuring Solar RECs.
- The new floor price that would be applicable to ALL SOLAR projects has been reduced to Rs.3500/REC and forbearance price to Rs.5800/REC.
- The order suggests that solar projects commissioned during year 2013 would get 1.47 Solar RECs, 2014 would get 1.19 Solar RECs and 2015 onwards to get 1 REC for every 1 MWh of Generation.
- Likewise, OA and CGP based REC projects to get 0.74, 0.6 and 0.5 Solar RECs (2013, 2014 and 2015 respectively) for every 1 Mwh.
- Vintage Multiplier for Solar Projects:
According to our understanding, there are three main issues in the current REC market.
- Over supply of RECs
- Skewed pricing of RECs especially in case of Solar
- Laid-back enforcement.
The summary of REC Floor and Forbearance price is shown in the graph below:
The current regulation seems to tackle first two issues as the third part is largely in the hands of state regulators. Overall it’s a welcome step and would reinstate faith of stakeholders in REC market.
The comments are invited by hon’ble CERC not later than 30.10.2014 and hearing is scheduled on 04.11.2014. We request all the stakeholders to submit their comments and express their views to hon’ble Commission.
The relevant document can be accessed here.
Press Coverage Link.
Contributed By: Vibhav Nuwal
