REC Market in
India: Challenges and Road Ahead
The need to boost generation of power from
renewable energy resources is no more a matter of choice. Growing need for
energy security and environmental management commitments have forced countries
to increase their policy thrust on power generation from renewable energy
sources. As a result, many policies, frameworks and programmes have been
designed and introduced to promote use of renewable energy. Use of Renewable
Energy Certificates is one such instrument.
Renewable Purchase Obligation (RPO) of state
obligates states to meet certain percentage of their power demand from power
generated by renewable sources. The obligated entities are distribution
companies, power suppliers and open access consumers. However, given the
constraints of unequal distribution of renewable energy resources, an alternate
mechanism to fulfil RPO is Renewable Energy Certificates (REC). It is a market
based instrument which can be purchased by obligated entities to meet their RPO
thereby promoting renewable energy.
Government in several countries, across the
globe, have set up renewable power purchase obligation system for more
systematic and larger exploitation of renewable energy sources in their
respective regions. RECs are globally accepted practice to ensure the
compliance of these obligations in a respective country. Tradable REC systems
play a vital role in supporting renewable obligation systems in most of the
countries including Australia, the U.S. and European Union. India is the first
among the developing nations to introduce REC mechanism in the country. Here
experience of few selected countries across the globe has been briefly
presented.
Australia
is among the first few countries to introduce renewable power purchase
obligations. Mandatory Renewable Energy Target (MRET) was introduced in year
2001 in order to increase the contribution of renewable sources in the total
electricity supply. The MRET required an additional 9,500 GWh of electricity to
be produced from renewable sources by year 2010. However, this target was
revised to 45,000 GWh of additional
renewable energy between 2001 and 2020 in year 2011 by Gillard Government. From January 1, 2011, the Mandatory Renewable
Energy Target (MRET) was split into two parts - the Large-scale Renewable
Energy Target (LRET) and the Small-scale Renewable Energy Scheme (SRES).
LRET provides financial incentive for
large-scale renewable power stations, such as wind, solar and hydro-electric by
providing a mechanism for the creation of Large-scale Generation Certificates
(LGCs – 1 MWh) by these power stations based on the amount of renewable energy
electricity produced. The LRET places a legal liability on the electricity
retailers to purchase certain amount of LGCs from these power stations to meet
their annual target. The targets of LGCs for liable entities are set by the
Renewable Power Percentage (RPP). The Government has also set a target of 41,850
GWh under LRET to be achieved by
year 2020.
SRES provides a financial incentive for
owners to install small-scale RE installations, such as solar water heaters,
air sourced heat pumps and small generation units (small-scale solar panel,
wind and hydro systems). These systems are eligible for certain number of
Small-scale Technology Certificate (STC), for every MWh, renewable energy
produced or displaced. These STCs can be sold either directly to the liable
buyer or STC trader/broker in open STC market or through the STC clearing house
at a guaranteed price of $40 (excluding Goods & Services Tax).
U.S. has the most extensive and diverse
experience with renewable obligation systems. More than 30 of the 50 U.S.
states have Renewable Portfolio Standards (RPS) in place as the regulations
vary from state to state and there is no federal policy. In order to meet the
RPS compliances, RECs are issued for every 1 MWh of electricity produced from
the eligible renewable energy sources. These certificates can be traded in voluntary
market and compliance market in the U.S.
Swedish government introduced a trading system called
the Elcertifikat System in May 2003 for REC. The objective of the electricity
certificate system is to increase the production of renewable electricity to 17
TWh by 2016. The
system replaces all earlier public grants and subsidy systems. The electricity
certificate system will run till the end of 2030. Moreover, quota obligation
was created to generate demand for renewable electricity. .In this case, the
suppliers were obligated to purchase certificates.
This system has helped the Government in replacing all public grants and subsidy
system.
Many
other countries such as UK, Italy and Japan also have REC mechanism in place to
meet RPO targets. Table 1 gives a brief overview of REC mechanism followed in
these countries. Key takeaway for India from other countries with such
certificate has been many. First being increase of validity of REC from 1 year
to 2 years. Another takeaway for India could be from Australian REC model
wherein, small scale renewable energy based applications are given Small-scale
Technology Certificate (STC). India has been encouraging off-grid applications
for rural areas. Such small-scale technology certificate can serve dual purpose
of REC market improvement and boost adoption of off-grid applications.
Table 1: Features
of REC Mechanism Globally
Parameters
|
UK
|
Italy
|
Japan
|
RPO
Compliance
|
Mandatory
|
Mandatory
|
Voluntary
|
RE Target
|
15% by
2020
|
17% by 2020
|
1.63% by 2014
|
Obligated Entity
|
Electricity Suppliers
|
Electricity Suppliers
|
Corporate Entities
|
RE Validity
|
2 years
|
3 years
|
2 years
|
Settlement
period
|
1 year
|
1 year
|
1 year
|
Certificate
size
|
1 MWh
|
Initially 100 MWh, then 50 MWh and now 1 MWh
|
1 MWh
|
Source: Infraline Research
REC in India
Growth of
renewable energy sector in India is commendable. The sector has been performing
remarkably well for past 5 years with cumulative growth rate of 18 percent
(figure 1). Various factors such as availability of soft loans, subsidies by
central and state Government and various fiscal incentives have been the
driving factor for this growth. Primarily, announcement of National Tariff
Policy in 2006 which set forth the objective of 3 percent of solar energy in
the total energy mix for power generation by 2022 followed by National Action
Plan for Climate Change (NAPCC) in 2008 which targets to achieve 15 percent
share of renewable energy in total energy mix by 2020 provided a breakthrough
to the growth of this sector. The current share of renewable in power mix is
about 12.39 percent. To achieve this,
among other steps, GOI has introduced, Renewable Purchase Obligation (RPO)
which specifies a minimum percentage of power from renewable sources for each
of the states in India. In pursuit to meet this objective, a market based
instrument, called Renewal energy Certificate ( REC) was introduced in the country in year 2010.
Figure 1: Growth Trend of Renewable Energy based Installed Capacity in
India
Source: Infraline Research
Regulatory
and Policy Framework for REC Market
Renewable energy has been promoted in the
country through various policies constituting fiscal incentives and subsidies.
RPO has provided a significant impetus to the growth of renewable sector in
India. Due to resource distribution and difference in the regulations and
policies in different states, the pace of development of renewable energy is also
varying. Due to this the RPO targets are different in different states set by
respective State Electricity Regulatory Commission (SERC). Resource rich states
have ability to set and achieve a higher target as compared to states moderate
or low in resources. To overcome this diversification, RECs, the tradable
market instruments play a primary role. The state which is deficit in
generating renewable power can buy RECs to meet their RPO. Therefore, RECs play
a vital role to:
·
Overcome geographical disparities in distribution of renewable sources
·
Decrease risk for local discom by limiting its liability to energy
purchase
·
Reduction of RE transaction costs
·
Meet RPO
There are also various benefits of REC scheme
like:
·
It provides a wider scope to comply with RPO i.e. the obligated entities
have an option to purchase REC instead of procuring electricity directly from
RE generator
·
The transmission of electricity is evaded due to which costs associated
with transmission and any operational congestions are avoided
·
It can directly cater to the requirement of corporate and other entities
interested in purchasing green power voluntarily
Various policies that have been launched by
the Government covering development of renewable energy sources, market for
purchase of energy from renewable sources and introduction of RECs are given in
table 2.
Table 2: Policies,
Acts and Missions promoting Renewable Energy and need for REC
Policies/Acts/Missions
|
Effect
on Renewable Development
|
Electricity
Act 2003
|
·
Section 61(h) emphasised on promotion of cogeneration and generation
of electricity from renewable resources as explicit responsibility of SERC
·
It mandated the SERCs to formulate a percentage that would be
purchased from renewable/cogeneration sources out of total consumption in
section 86(1)e.
·
As per section 3 of act, National Electricity Policy to be formulated
for proper use of resources including renewable
·
Also permitted the stand alone systems based on renewable for rural
areas in section 4 of the act
|
National
Electricity Policy 2005
|
·
According to section 5.12.2, it suggested promotion of renewable and
non-conventional energy sources through prescribing a fixed percentage of
power from such sources of energy by SERCs.
|
National
Tariff Policy 2006
|
As per section 86 (1) e:
·
It mandates SERCs to purchase a minimum percentage of energy from
renewable sources
·
It is advised to include solar power purchase obligation of 0.25percent
in phase 1 and going up to 3 percent by 2022
·
RECs can be purchased for meeting obligations
|
RPO
|
·
As mandated in the acts, RPO was implemented to promote renewable
energy demand in the country
|
NAPCC
2008
|
·
It sets the target of 5percent renewable energy purchase for FY 2009‐10
to be increased by 1percent for the next 10 years.
|
JNNSM
|
·
It has a target of achieving 20,000MW of solar power by 2022. Only
after launch of JNNSM, solar RPO was announced as mentioned in the National
Tariff Policy
|
Source: Council on Energy, Environment and
Water
These policies established a framework for
setting RPO targets and complying with them. The RPO targets set by SERCs for
the financial year 2013-14 are given in table 3.
Table 3: RPO targets for states 2013-14 (in
percentage)
State
|
Non-Solar
RPO
|
Solar
RPO
|
Andhra Pradesh
|
4.75
|
0.25
|
Arunachal Pradesh
|
5.45
|
0.15
|
Assam
|
5.40
|
0.20
|
Bihar
|
4.00
|
0.50
|
Chhattisgarh
|
6.00
|
0.75
|
Delhi
|
4.60
|
0.20
|
JERC (Goa & UT)
|
2.60
|
0.50
|
Gujarat
|
5.25
|
1.50
|
Haryana
|
3.00
|
0.15
|
Himachal Pradesh
|
10.00
|
0.25
|
Jammu and Kashmir
|
4.75
|
0.25
|
Jharkhand
|
3.00
|
1.00
|
Karnataka
|
10.00
|
0.25
|
Kerala
|
3.95
|
0.25
|
Madhya Pradesh
|
4.70
|
0.80
|
Maharashtra
|
8.50
|
0.50
|
Manipur
|
4.75
|
0.25
|
Mizoram
|
6.75
|
0.25
|
Meghalaya
|
0.60
|
0.50
|
Nagaland
|
7.75
|
0.25
|
Orissa
|
5.80
|
0.20
|
Punjab
|
3.37
|
0.13
|
Rajasthan
|
7.00
|
1.00
|
Sikkim
|
0.00
|
0.00
|
Tamil Nadu
|
8.95
|
0.05
|
Tripura
|
0.90
|
0.10
|
Uttarakhand
|
5.00
|
0.05
|
Uttar Pradesh
|
5.00
|
1.00
|
West Bengal
|
3.75
|
0.25
|
Source: MNRE
Salient features of the REC mechanism followed in India are as follows:
·
The RE generators will have two options - either to sell the renewable
energy at preferential tariff fixed by the concerned Electricity Regulatory
Commission or to sell the electricity component and environmental attributes
separately.
·
On choosing the second option, the generator can sell the ‘electricity
component’ to either the local distribution company at its average power
purchase cost (APPC), the traders, open consumers or to the power exchanges at
a mutually agreed/market determined price. In addition, the ‘environmental
attributes’ can be exchanged in the form of the REC at power exchange.
·
One REC is equivalent to 1 MWh of electricity injected into the grid and
is valid for 2 years.
·
The Central Agency (the National Load Dispatch Centre has been
designated as Central Agency) will issue the REC to RE generators.
·
The REC is exchanged only in the power exchanges approved by Central
Electricity Regulatory Commission (CERC) within the band of a minimum (floor
price) and a maximum (forbearance price) value to be determined by CERC.
·
The floor and forbearance price for solar and non solar REC during
control period of 2012-17 are given in table 4. The initially determined
forbearance prices of solar and non-solar REC were INR 17,000 and INR 3,900
respectively while floor price for solar was INR 12,000 before CERC’s amendment
in FY 2012. The amended prices are given in Table 4 below
Table 4. Floor and Forbearance Price of REC
|
Non Solar REC ( INR/MWh)
|
Solar REC ( INR/MWh)
|
Forbearance Price
|
3,300
|
13,400
|
Floor Price
|
1,500
|
9,300
|
Source: MNRE
·
The distribution companies, open access consumers and captive power
plants (CPPs) are the obligated entities which are required to meet RPO. These
entities will have the option of purchasing the REC to meet their RPOs.
Eligibility criteria for
obtaining REC are as follows:
·
REC would be issued to grid connected RE generators only, SERC to
recognise REC as valid instrument for RPO compliance
·
Purchase of REC would be deemed as purchase of RE for RPO compliance
·
Grid connected RE technologies with minimum capacity of 250 kW and
approved by Ministry of New and Renewable Energy (MNRE) would be eligible under
this scheme
·
RE generations with existing PPAs with preferential tariff are not
eligible for REC mechanism
·
According to CERC, if any company terminates its PPA pre maturely, it
is not eligible for participating in REC scheme for a period of three years
from the date of termination of agreement or till scheduled date of expiry of
PPA whichever is earlier.
REC
Experience So Far
As of September 16,
2013, about 776 projects under REC mechanism have been registered with capacity
3,763.38 MW as given in Figure 2. The majority share of REC comes from 539 registered
wind projects, followed by 65 biomass and 79 cogeneration projects. There are
87 solar projects and 26 small hydro projects registered under REC mechanism. From
these projects India generates about 7,315,104 RECs of which 55 percent are
traded as given in table 5. Currently, RECs are traded on every last Wednesday
of the month.
Figure 2: Break-up of Projects Registered
Under REC Mechanism (as of September 16, 2013)
Source: REC
Registry
Table 5: REC Issues and Traded in India (as
of September 16, 2013)
|
Solar
|
Non Solar
|
Total
|
REC Issued
|
59,702
|
7,255,402
|
7,315,104
|
REC Traded
|
23,800
|
3,963,703
|
3,987,503
|
Source: REC
Registry
RECs are currently
traded in energy exchanges— India Energy Exchange (IEX) and Power Exchange
India Limited (PXIL). Introduced with high anticipation with market hitting the
forbearance prices in March 2011, REC market 2 years down the line has received
a lukewarm response due to lack of enforcement of RPO mechanism and poor
financial health of discoms.
In March 2011, REC
supply was limited and buying bids were high due to which the clearing prices
touched the forbearance price. But there was a difference between bids, supply,
demand and clearing prices at both the exchanges. Demand to Supply ratio at IEX
stood at staggering 469 against
just 1.18 at PXIL.
Demand for solar RECs was high whereas there was no selling volume for them.
High demand i.e.
70,701 buy volume for non solar and 33,026 buy volume for solar, showed the
tremendous faith of buyers in the mechanism in the first trading session in
March 2011. The participants were bullish about the trading and aggressive
bidding took place. The demand for non-solar RECs has seen the trend of high
demand during the period of February-April every year touching forbearance
prices; and latent demand during the remaining part of the year. However, in
the FY 2013, the non-solar REC market has collapsed with market clearing prices
touching floor prices for over 6 months now as given in Figure 3.
Figure 3. Market Clearing Volume and Market Clearing Prices of Non-Solar
RECs
Source: Infraline Research
The solar certificate trading started in May
2012. Market was gaining pace for solar certificates, at the same time as the
new financial year began; meeting the RPO compliance became a long term objective
of the obligated consumers due to which market for non solar trading saw a
fall. Whereas, solar certificate market was comparatively stable as buying bids
were high. Initially the ratio of buying to selling bids in June 2012 was 10.3
and clearance price was at forbearance price i.e. INR 13,400/REC. Though slowly
the ratio of buying to selling bids decreased like in December 2012, the ratio
stood at 1.5 but yet the price stood close to the forbearance price i.e. around
INR 12,500/REC as shown in figure 4. As the financial year end approached, the
demand and supply volumes increased in the market to fulfil the RPO
requirements and prices again touched INR 13,400/REC in March 2013 although the
buy to sell bid ratio was only 2. However, post April 2013, the market has
collapsed witnessing very low demands.
Figure 4. Market Clearing Volume and Market Clearing Prices of Solar
RECs
Source: Infraline Research
Voluntary
REC market
The purchase of renewable energy beyond
compliance market forms the voluntary market. The demand in voluntary market is
not mandated. REC becomes a part of compliance market if its demand is due to
necessity of meeting obligations. But if the demand of REC is in existence due
to the corporate, PSUs and other consumers to maintain sustainability and
achieve their Corporate Social Responsibility (CSR) targets, the demand is
voluntary. CSR is the devoir of the company to work in a socially, economically
and environmentally sustainable manner.
In India, the major REC market is for compliance. To fulfil the RPO needs, RECs are
purchased by state discoms and other high end energy consumers. Government
considers RPO as a driver to generate renewable energy in the country energy
mix. REC will help fulfil targets of the states which are resource deficient.
Maximum trading generally occurs in the months of January to March as these are
the last few months of the financial year for which RPO targets are set.
The amended directive of Department of
Public Enterprises (DPE) for Central Public Sector Enterprises (CPSE) which
came into force on 1st April 2013 has widened the scope of renewable
market in India. The directive targets at the CSR and sustainability of the
organizations. The focus of CSR and Sustainability is on capacity building,
empowerment of communities, inclusive socio-economic growth, environment
protection, promotion of green and energy efficient technologies, development
of backward regions, and up-liftment of the marginalised and under-privileged
sections of the society. In one of the clauses it is mentioned that priority for
the project should be accorded to activities pertaining to:
·
Inclusive growth of society, with special attention to the development
of weaker sections of society and the backward districts of the country
·
Environment sustainability
CPSEs will have to plan for environmental
sustainability and take up projects for water, waste or energy management,
promotion of renewable sources of energy and biodiversity conservation.
Projects for reduction of carbon emissions through energy efficient and
renewable energy technologies, greening the supply chain, and innovation in
products and services which have a tangible impact on environmental
sustainability are to be undertaken. These mandated project activities can have
a positive impact on the otherwise presently weak REC market.
However, Company Act 2013 which came into
force in August 2013, mandates every company having net worth of INR 500 crore
or more, or turnover of INR 1,000 crore or more or a net profit of INR 5 crores
or more during any financial year to ensure that the company spends, in every
financial year, at least 2 percent of the average net profits of the company
made during the three immediately preceding financial years, in pursuance of its
Corporate Social Responsibility Policy. The company shall give preference to
the local area and areas around it where it operates, for spending the amount
earmarked for Corporate Social Responsibility activities.
The purchase of voluntary REC to suffice the
sustainable development goals was accepted with an amendment in the guidelines
for sustainability development FY 2012-13 by Department of Public Enterprises. In
the trading session of January 2012, Power System Operation and Corporation
(POSOCO) became the first public sector enterprise to voluntarily buy RECs to
offset their carbon footprint and meet sustainable development goals. The
impact of these directives may not be very high on the REC market, but it has
brought about an initiative to participate in voluntary market. In the
financial year 2012-13, there has been participation from individual and
private players also in the voluntary REC market as shown in table 7.
Table 7: Voluntary REC buyers in 2012-13
Buyer
|
State
|
RECs
purchased
|
CPSEs
|
|
|
Power
System Operation Corporation Ltd.
|
Delhi
|
800
|
Security
Printing and Mining Corporation of India Ltd.
|
Delhi
|
667
|
NMDC
Ltd.
|
Andhra Pradesh
|
2,500
|
Rural
Electrification Corporation Ltd.
|
Delhi
|
16,400
|
Ennore
Port Ltd.
|
Tamil Nadu
|
66
|
Rashtriya
Ispat Nigam Ltd.
|
Andhra Pradesh
|
100
|
IREDA
|
Delhi
|
100
|
Other
Voluntary Buyers
|
|
|
Sumit
Kumar
|
Bihar
|
1
|
Indian
Energy Exchange Ltd.
|
Delhi
|
5
|
EKI
Energy Services Ltd.
|
Madhya Pradesh
|
6
|
EKI
Energy Services
|
Madhya Pradesh
|
5
|
Total
|
|
20,650
|
Source: NLDC
There is a need to improve involvement of
individual buyers in the voluntary market. This can be done by taking certain
measures like:
·
Decreasing the value of one REC from 1 MWh to some smaller value to
encourage small players to increase their basket of green energy
·
The transaction cost of trading in power exchanges should be lowered
·
Procurement through power exchanges should be made simpler
·
Some initiatives through policies
·
Creating awareness among people
Addressing Challenges for REC
There are various hindrances in the
development of REC mechanism in India. These need to be resolved for the market
to eveolve and mature with time. Some issues and the recommendations are as
following:
·
RPO enforcement: There has been no audit so far on
the compliance of RPO by various agencies. The mixed level of response is
somehow not prompting the designated agencies or Government to take any action
against the defaulters. This is further encouraging the neglect on the part of
obligated consumers.
There is also insecurity with the
market participants to make sell bids in the earlier months of new financial
year as there is risk associated of low price sale. Whereas the expected buyers
are more towards financial year end and are willing to meet the obligation and
there is a fair chance of market prices to move upwards. But at the same time
the market sentiment can be hurt as higher sales bid hampers the prices. So it
becomes important on the part of Government to intervene and reduce the
compliance period from one year to half yearly or quarterly to stabilize the
market to some extent.
·
Pricing of REC: Considering the current
scenario, there is a respectable choice to fulfil the RPO. The obligated entity
can purchase power directly from generator as well as buy REC. The large profit
making private firms that are obligated can establish captive power plants
based on renewable energy. Under these scenarios it becomes crucial to
determine the floor and forbearance price of REC keeping the competition in
view.
For example, for current
financial year i.e. 2013-14, the tariff determined for solar PV by CERC is INR 7.87/unit
and for solar thermal it stands out to be INR 10.69/unit considering
accelerated depreciation benefit for both. Whereas, the floor price of REC is
INR 9.3/unit which is higher than solar PV tariff. Any obligated entity going
through a route of REC will have to shell out more money as compared to
purchase of power directly from the generator if considered only on floor
prices for meeting its target. The price of solar REC almost reaches
forbearance prices during the times when market sentiments are positive. Buying
REC can thus be a pricey option. The price revision of REC can also be done on
short term basis so as to encourage the sellers to trade their REC before price
revision instead of holding them back for five years and wait for REC to touch
forbearance price.
·
Voluntary market: As discussed, the voluntary
market has yet not gained the required momentum in India. There are very few
private entities taking part in REC market. With Company Act, 2013 the
voluntary REC market is expected to pick up as it mandates companies with
turnover of above INR 500 crore, or
turnover above INR 1,000 crore or more or a net profit above INR 5 crores or
more to spend minimum 2 percent of their PAT in CSR.
·
Minimum capacity eligibility: As the unit of one REC equals 1 MWh,
it becomes challenging for the small industry and individual consumers to
participate in the market. Also there is no order to permit decentralized and
off-grid generation to be a part of market. The rooftop solar PV, stand alone
systems can be given an entry into REC market, opening a door of opportunity
for small industry and voluntary players to add green energy to their basket.
·
RPO incentive: Incentive
is required by states to fulfil the RPO because there are costs associated with
it which needs to be recognized. Some of the costs include the procurement of
balancing power required to conceal the intermittent nature of renewable,
higher cost of renewable and cost of transmission infrastructure. It is
important to understand the costs and then devise an incentive mechanism for
different states.
·
Vintage based Multiplier: CERC
has proposed this mechanism for solar plants. The concern was to cover the
solar plant developer from fall in REC prices in future. The capital cost of
solar power plants has fallen considerably in the span of 4 years as shown in
figure 5. The plant developer makes upfront capital investments and return is
received in future. To mask this effect of decrease in prices, a multiplicative
factor is applied in order to receive more RECs in future. This factor will be
in line with fall in CAPEX.
Figure 5: Capital Cost Trend for Solar PV Power Plant in India (INR/MW)
Source: Infraline
Research
·
Compliance and Penalty: The biggest challenge towards
success of REC mechanism, and thereby the growth of renewable power sctor, is
non-compliance of RPO targets by obligated entities. Unless the RPO compliance
is implemented in absolute manner their power to drive renewable will remain in
jeopardy. Recently taking a strict stance against non compliance, MERC has
issued an order which requires obligated entities to meet their RPO compliance
by March 2014 or else face heavy penalties. Though several SERC’s have
underlined provision of penalties only couple of them seems serious to enforce
the provision. Penalty above forbearance prices must be imposed. Once the RPO
implementation is strictly enforced by regulators, this will drive REC market
as well as renewable market in general.
Infraline Viewpoint
The market is
unpredictable as it is at early stages of evolution however general some
elements of a bullish trend are observed in the closing months of financial
year. As show in table 8, a project of 1 MW solar PV plant can be profitable
under REC mechanism. Current price of solar PV power is approximately INR 8/kwh
via PPA mode. Whereas, via REC mechanism a developer is eligible to get minimum
revenue at floor prices is INR 9.3/kwh just by sale of REC. In addition to it,
on sale of power at APPC, a developer will get approximately INR 2/kwh.
Therefore, REC mechanism at present, provides a profitable option for power
plant developer since cost of solar power is decreasing rapidly where as
benchmark upper and lower limit of REC prices are fixed for the control period
from 2012 to 2017.
Table 8: Possible profit from 1 MW solar PV
plant in India under REC mechanism
Parameter
|
Cost
(INR)
|
Accreditation
|
Application processing fee
|
5,000
|
Accreditation
Charges (for 5years)
|
30,000
|
Annual Charges
|
10,000
|
Re-validation
(after 5years)
|
15,000
|
Registration
|
Application processing fee
|
|
|
Registration
Charges (for 5years)
|
1,000
|
|
Annual Charges
|
5,000
|
|
Re-validation
(after 5years)
|
1,000
|
|
Application processing fee
|
5,000
|
Issuance
|
Issuance
fees (Rs10/certificate-1500 Mwh/year)#
|
15,000
|
Trading
|
|
REC
trading-One time charge for opening of portfolio
|
40,000*
|
Total
Cost of REC Issuance (A)
|
107,000
|
Scenario
|
Worst case
REC at 9,300
|
Average
REC at 11,350
|
Best Case
REC at 13,400
|
Revenue
via REC (B)
|
13,950,000
|
17,025,000
|
20,100,000
|
Additional
Revenue only by Sale of REC (B-A)
|
13,843,000
|
16,918,000
|
19,993,000
|
Source: Infraline
Research
#1MW solar PV plant will produce on an
average 5000 units a day. In 300 sunny days, energy produced will be 1500MWh
which will correspond to 1500REC.
# Taxes applicable
* Trading cost per REC is extra
Infraline Energy Renewable Energy Research Team
