RECs in Solar Energy

As part of its attempt to boost green energy, the Cabinet has amended the Power Tariff Policy to make it mandatory for state governments to have solar energy as 3% of their total power purchases by 2022. The solar power purchase obligation for states may start with 0.25 % in Phase-I, which stretches to 2013 and goes up to 3% by 2022.

The present amendment in the tariff policy is according to the National Solar Mission Strategy, which was approved by the Cabinet on November 19, 2009.  According to the amendment, the power purchased by the state electricity boards (SEBs) or other state utilities will be complemented by the solar specific Renewable Energy Certificate (REC) mechanism through which solar power generation companies will sell certificates to the buyers. The certificate will also help the buyers meet their solar power purchasing obligations.

The Cabinet also approved a new policy for allocation of electricity that will be generated by upcoming state-run thermal power plants. As much as 50% of the electricity generated will go to the home state in which the power plant is located while 35% will go to the other constituents of the region and 15 % will be put at the disposal of the Centre.

Effects

Many solar companies are looking to sign PPA at average state electricity rate with the rest being compensated by RECs. We are currently studying the feasibility of investment in REC solar projects. Once a more thorough understanding is developed on REC, we will include our study on the blog. Meanwhile I invite discussion and brainstorming sessions with bankers and professionals on investment in renewable energy on basis of RECs and forecasting of RECs.

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