The Central Electricity Regulatory Commission(CERC) has come out with the new REC prices for Solar and Non-Solar renewable energy projects. The prices will be fixed between the period April 2012-March 2017.
The new floor and forbearance prices are as follows:
|Floor Price (Rs./REC)||1500||9300|
|Forbearance Price (Rs./REC)||3300||13400|
There was some discussion involving stake holders and CERC over the REC prices; keeping in account the need to have stable prices for a certain time period and in a viable range to allow project developers to make the projects bankable.
On the solar front, with an average purchase price of States being ~Rs.2.50-Rs.3.50 and under REC; the investors could look at a minimum of Rs.11.80 per unit which is nearly the average price of first batch of NVVN’s Phase I project. Does not make me feel very good. I would have been more comfortable with old REC prices for 5 years or new REC prices for atleast 7 years.
Bankers/Investors will also take some time to see how the concept functions on the ground. They may also not be very comfortable with a 5 year fixed price. Since 70-80% of a project funding comes in form of debt, CERC will need to make sure that bankers are assured of a certain cash flow.
There have been some power developers looking at solar projects under REC; but then they have been talking about huge projects of the size of 5oMW. I have not yet heard about their financial closure and with the current REC prices for just 5 years, I am not sure if investors will like to take such a huge risk. But lets see how things move.
Non-Solar projects developers too are taking time to learn and see how REC works on the ground. Looking forward to a new learning experience.