Renewable Energy Certificate (REC)ENERGY

Renewable Energy Certificates REC

Renewable Energy Certificate (REC) mechanism is a market based instrument to promote renewable energy and facilitate compliance of renewable purchase obligations (RPO). It is aimed at addressing the mismatch between availability of RE resources in state and the requirement of the obligated entities to meet the renewable purchase obligation (RPO).

Central Electricity Regulatory Commission introduced REC mechanism to ease the purchase of renewable energy by the state utilities and obligated entities, including the states which are not well endowed with RE sources. REC framework seeks to create a national level market for renewable generators to recover their cost. One REC (Renewable Energy Certificate) represents 1 MWh of energy generated from renewable sources.

Under the REC mechanism, a generator can generate electricity through the renewable resources in any part of the country. For the electricity part, the generator receives the cost equivalent to that from any conventional source while the environment attribute is sold through the exchanges at the market determined price. Revenue for a RE generator under REC scheme includes revenue from the sale of electricity component of RE generation and the revenue from the sale of environmental attributes in the form of RECs. The obligated entity (Distribution Licensees, Open Access consumers, Consumers owning Captive Power Plants) from any part of the country can purchase these RECs to meet its RPO compliance.

Specifications of the REC Framework:

Name of Parameter Details respectively
REC Denomination 1 MWh
Categories 1. Solar REC 2. Non-Solar REC
Validity 1095 Days after issuance
Trading Platform Power Exchanges only
Banking Not Allowed
Transfer Type Single transfer through Power Exchanges only , repetitive trade of the same certificate is not possible
Borrowing Not Allowed
Price Guarantee Through ‘Floor’ Price (Minimum Price)
Penalty for Non-compliance ‘Forbearance’ Price (Maximum Price)