Renewable energy demand-supply mismatch

At the first trading session supply was about 500 RECs while demand was at 1,00,000 RECs

By Ruhi Kandhari
Published: Monday 18 April 2011

The demand for renewable energy has exceeded its availability. At the first session of trading for renewable energy certificates (RECs),the supply was of about 500 RECs, while the demand stood at over 1,00,000. RECs signify one megawatt hour of energy generated from renewable sources.

In order to meet their Renewable Purchase Obligation (RPO) (see 'Blank on target', Mar 31, 2011) state electricity distribution companies and private power generators are required to meet some amount of energy requirement using renewable sources. If they are unable to meet their RPO by generating renewable energy, they have to buy RECs.

The national action plan on climate change (NAPCC) envisages a five per cent contribution to energy from RPO but the achievement was 3.9 per cent in 2010, driving the demand for buying RECs. The bidders placed bids at two power exchanges, India Energy Exchange (IEX) and Power Exchange India Ltd (PXIL), on March 30.

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A forum of regulators, an advisory body of state and central electricity regulators, had suggested the use of RECs to remove roadblocks in flow of renewable energy from surplus states to the deficit states. It was after this Central Electricity Regulatory Commission (Terms and Conditions for recognition and issuance of Renewable Energy Certificate for Renewable Energy Generation) Regulations, 2010 were notified on January 14 last year. RPO is mandatory but REC is a voluntary mechanism for states. In an optimistic scenario, it expects 177 projects to participate under the REC scheme and in pessimistic, at least 106 projects.

The bids are divided into solar RECs and non-solar RECs.

A total of 424 non-solar RECs were traded on two power exchanges, out of these 150 non-solar RECs were transacted at a price of Rs 3,900 per REC, which is the highest price decided at which RECs could be traded. The high price was because of high demand as a total of over 1,00,000 non-solar bids were received. Rest of the RECs were sold at PXIL at Rs 2,225. IEX received 30,001 purchase bids for solar RECs but no solar energy projects has been registered for selling RECs yet.

The reason behind such low supply is that the mechanism is in its initial phase and the National Load Despatch Centre has issued 532 RECs till date since it recently started registering renewable energy projects, says Vijaypal Singh of Pune-based non-profit Prayas Energy Group. “The supply of RECs will increase due to increasing number of projects registering under the REC mechanism,” he adds.

The next trading session will be on April 27, 2011.



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