REC Prices At Power Exchanges Take A Dip After Tweak In Rules

REC Prices At Power Exchanges Take A Dip After Tweak In Rules

With a tweak in the regulations related to Renewable Energy Certificates (RECs), the Indian Power Exchanges has seen its increased trading. The domestic power exchanges like IEX claimed that with an increase in its trading, the prices of the same have shrunk. 

The top management of IEX in its recent investors call told its investors that REC trading on power exchanges has surged twice in a month for the different types of RECs. It said that there has been a fungibility and increased liquidity in the REC market. 

“…because of the removal of REC-base price, REC prices have now come down. At nearly 32.5 lakh certificates, REC volume in quarter 4 of FY ’24 was twice that of same quarter last year and at 75 lakh certificates in the whole year, the volume was higher by almost 27% with respect to FY ’23,” Satyanarayan Goel, Chairman and MD of IEX said. 

He said that since the new REC regulations, prices have continuously become more competitive and were traded at the lowest ever price of INR185 against INR1,000 in April ’23. 

“This will incentivize obligated entities to buy RECs to meet their renewable purchase obligations. Many distribution companies and industries having captive generation, are purchasing RECs now to meet their obligations, because the prices are at all time low now,” he said. 

The IEX CMD said that all these regulatory measures improved sell-side liquidity on the exchange and helped soften power prices. As prices continue to remain competitive due to regulatory and policy measures, it is expected to present an opportunity for discoms and commercial & industrial users to optimize their power procurement costs, he added. 

As per IEX, a total of nearly 84 lakh certificates including REC and EScerts were traded in this year which was almost 37% higher. Recently, in the month of April IEX achieved 9 BU overall volume marking 14.1% year-on-year increase. 

The power exchange firm also expressed confidence on the usage of more renewable options in power trading. It said that with more BESS and PSPs coming into operations, its trading through power exchanges.

“Many pump storage plants are under construction, many battery storage systems are also going to come up now to meet the peak demand and most of these systems are going to be through the exchanges. So we, in fact, see a large opportunity for the exchange in this emerging scenario,” Goel said. 

What are RECs

Renewable Energy Certificates (RECs) are a mechanism where the renewable energy generators are incentivized for the generation of green power. These are governed by the regulations of the Central Electricity Regulatory Commission (CERC). Those obligated entities which have to mandatorily procure renewable energy have the option of procuring RECs.  In India, RECs are brought and solar through the three power exchanges in India-IEX, PXIL and HPX.