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.