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CERC wants REC trading to be more vibrant
CERC is concerned about the strategy of companies as their methods are not right for a market to develop. The new set of guidelines proposes it make it mandatory for states to meet a certain..

IN A bid to make renewable power trading on the exchanges more vibrant and gain volumes, the Central Energy Regulatory Commission (CERC) proposes to spread the renewable power purchase obligation (RPO) of states over one year and at specified intervals.
According to renewable energy power obligation (RPO) power distributors and industrial consumers across the country need to get as much as 14 per cent of their supplies from renewable sources. A unique initiative of renewable energy certificate (REC) trading was launched in India in the month of February 2011 in an effort to promote cleaner energy nationwide. Under this programme, the clean energy producers are allowed to trade in RECs through country’s two energy exchanges -Indian Energy Exchange and Power Exchange of India.
The companies buy RECs to meet statutory obligations to purchase a minimum level of renewable energy. One REC represents one megawatt-hour of energy generated from renewable sources, such as wind, solar or biomass, and remains valid for a year.
According to a CERC official, states have to take five per cent of their entire annual power requirement from renewable resources under RPO. States are seen usually buying power at the end of the financial year, which is why the first session of renewable energy trading (REC) in March witnessed 424 non-solar RECs traded at a clearing price of Rs 3,900 per REC. In contrast, the second trading session in April saw 150 RECs traded at a clearing price of Rs 1,500 per REC.
The trading of RECs witnessed a surge in the May session after not too encouraging responses in the earlier sessions. The trading, which takes place once a month over the country’s two power exchanges, saw the credits surge more than 70-fold in its fourth session. On May 25, 2011, buyers purchased 18,502 RECs at the floor price of 1,500 rupees ($33) way ahead of the 260 RECs that were sold in the previous session in April. Each credit represents 1 megawatt-hour of renewable electricity fed into the transmission grid by a power plant.
CERC is concerned about the strategy of the companies, as it is not the right practice for a market to develop. “It is not only detrimental to the market and price discovery but also for the renewable energy generators who could not even recover cost this way. Thus, the proposal envisages making the five per cent RPO staggered twice or four times annually, said a CERC official.”
The new set of guidelines proposes to make it mandatory for states to meet a certain percentage of their entire five per cent RPO biannually or four times a year. Discussions are underway with various stakeholders pertaining to the sector before a decision is reached. At the same time, CERC is also mulling to audit the price discovery mechanism being used at the country’s two power exchanges.
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