We plan to launch RECs by September end: Pramod Deo
Makarand Gadgil
What is the rationale behind introducing the Renewable Energy Certificates?
Under the Prime Minister’s mission on climate change, out of the country’s total electricity consumption, 15 per cent should come from renewable sources by 2020 and to achieve this goal the Central Electricity Regulatory Commission (CERC) along with the Forum of Regulators created the renewable purchase obligation (RPO) under which each distribution utility will have to source at least five per cent of its total power purchase in 2010, increasing by one per cent every year till 2020.
While some states are blessed with renewable energy resources, others are not, and among those who are blessed with renewable energy sources, very few have taken proactive steps to achieve their renewable potential.
Those distribution utility which don’t have adequate power purchase agreements from renewable sources to meet their RPO requirements can buy RECs and it will considered deemed fulfilment of RP obligations.
How will the REC market function and by when will the trading start?
As in the case of share markets, there are designated depositories in the case of RECs too. The National Load Dispatch Centre (NLDC) will work as depository of the RECs and they can be traded through the two power exchanges IEX and PXIL which are currently operating. We are trying to launch the trading of RECs by the end of September.
The industry fears that in the absence of any punitive mechanisms or non- mandatory nature of the RPO, there will be very few takers for the RECs?
That’s why we have suggested to the government that it should include the tariff policy for non-solar sources of renewable energy in the National Mission on Climate Change as it did in the case of solar power. Let me also add that all the state level regulators have agreed to RPOs at the Forum of Regulators. They have to now frame the respective state- wise rules.
But state distribution utilities are complaining that those who hold RECs will indulge in profiteering and it will lead to an increase in tariffs for the common consumers?
To prevent profiteering, we have fixed the minimum and maximum price at which RECs can be traded and the market can discover the price in that band. Also, we are not allowing the traders to participate in REC trade. And these restrictions will be in place at least till the REC markets in country become broad based and develop sufficient depth.
Even if it is made mandatory to meet RP obligations through RECs, very few state distribution utilities have sufficient cash to buy them?
In that case, the designated state government agency can buy them. For example for Maharashtra, the Maharashtra Energy Development Agency (MEDA) will buy RECs on behalf of the Mahadiscom and Mahadiscom can claim the funds spent by state’s designated agency through its annual revenue requirement (ARR) and pay it back to MEDA.
In the case of solar, the industry has expressed apprehensions, especially about projects which are not covered by the national solar mission and are subject to state regulatory mechanism as there is wide variance between tariffs set by different state electricity regulators.
If someone is not happy with the tariff determined by the SERCs then that generator should challenged it before Appellate Tribunal for Electricity (ATE).
Do you see in the near future energy from renewable sources achieving grid parity?
The power from wind sector has already achieved that status. One can easily compare the cost of wind power with power from gas-based stations. In the Indian context, it is also achievable in the case of solar. The price for setting up a solar power station is already coming down significantly and the cost of fuel in the case of thermal power is also increasing.
How will National Fund for Development of Clean Energy be utilised?
It is completely the government’s prerogative but I believe that a part of it will be used for subsidising solar projects which will come post 2013, as the facility of bundling of solar power with unallocated capacity of NTPC is till only 2013.
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