REC Trading Market Suffers a Hit, Again, As High Court Suspends Trading For 6 Weeks

The market for trading in Renewable Energy Certificates (RECs) has suffered a fresh blow with the Delhi High Court suspending trading in certificates issued before October 31, 2022 for six weeks. The high court passed its interim orders in response to a petition from the Indian Wind Power Association Northern Region Council’s that challenged the Central Electricity Regulatory Commission’s (CERC) 2022 Regulations, which removed the floor price for RECs.

REC floor prices have been an issue for a long time, and previously, placing a floor of Rs 1000 on these certificates had been seen as a key component of ensuring trading starts. Readers will recall that trading started only in November last year, after the changes were made.

The latest order will undermine confidence in RECs among generators who factored in earnings from sale of these certificates in their project viability calculations. In recent months, many smaller generators had been the subject of aggressive pitches from firms advising them on earning RECs on their projects. RECs have also been considered important for many entities to meet their renewable purchase obligation (RPO) targets, when normal methods donot work.

CERC, which had recently increased the fees involved for REC registration, validation and more significantly, had cited the need for investments in technology for the same. However, it has resisted lobbying to amend its regulations on the issue of floor price, considered essential for many generators to project income streams from renewable assets.

Broadly of course, the CERC has simply followed a well worn regulatory dictum of allowing ‘free market’ principles when only private sector entities are likely to be involved.