Regulatory Challenges to Prolong, No Respite for Renewable Energy Certificates

By Zulkarnain/ Updated On Tue, Jun 26th, 2018

The obligated entities may prefer to continue to buy renewable power directly rather than using renewable energy certificates (DECs), to comply with their renewable power obligations

Renewable Energy

There would be a lot of regulatory challenges that renewable certificates will continue to face and obligated entities may prefer to buy clean energy directly.

India Rating and Research said, “The obligated entities may prefer to continue to buy renewable power directly rather than using renewable energy certificates (DECs), to comply with their renewable power obligations.”

The uncertainties in trading DECs will stay, believes India Ratings and Research (Ind-Ra). After the reduction of floor-ceiling price of solar and non-solar RECs in March 2017 by Electricity Regulatory Commission (CERC), the REC trading was further affected.

The decision of CERC was upheld by Appellate Tribunal of Electricity (APTEL) in April 2018. The prices that were set by the CERC methodology reflect the price discovered through renewable power reverse bids.

During the financial year 2017-2018 the solar RECs traded at floor prices and the non-solar RECs traded, during the same period of time at an average clearing price of Rs 1450 and in the financial year 2017 at Rs 1500.

The revenue risks were further increased by the regulatory uncertainties and higher supply of RECs for the renewable projects that depended on RECs, Ind-Ra said.

The increasing renewable energy penetration (excluding large-scale hydropower) into the Indian grid system (12% in FY12 to 19% in FY18 of all India installed power capacity) and lower non-compliance of renewable purchase obligations by state utilities have been the major reasons for lower/stagnant REC trading at power exchanges, it said.

During April-May 2018, both solar and non-solar RECs traded at the new floor prices. Ind-Ra expects the demand-supply mismatch for RECs to remain high and hence both the types of RECs would trade near or par floor prices, it added.