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.
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. The obligated entity from any part of the country can purchase these RECs to meet its RPO compliance.
Salient Features of the REC Framework
- There will be a central level agency to be designated by the Central Commission for registration of RE generators participating in the scheme.
- The RE generators will have two options – either to sell the renewable energy at preferential tariff fixed by the concerned Electricity Regulatory Commission or to sell the electricity generation and environmental attributes associated with RE generation separately.
- On choosing the second option, the environmental attributes can be exchanged in the form of REC. Price of electricity component would be equivalent to weighted average power purchase cost of the distribution company including short-term power purchase but excluding renewable power purchase cost.
- The Central Agency will issue the REC to RE generators.
- The value of REC will be equivalent to 1 MWh of electricity injected into the grid from renewable energy sources.
- The REC will be exchanged only in the Power Exchanges approved by CERC within the band of a floor price and a forbearance (ceiling) price to be determined by CERC from time to time.
- The distribution companies, Open Access consumer, Captive Power Plants (CPPs) will have option of purchasing the REC to meet their Renewable Purchase Obligations (RPO). Pertinently, RPO is the obligation mandated by the State Electricity Regulatory Commission (SERC) under the Act, to purchase minimum level of renewable energy out of the total consumption in the area of a distribution licensee.
- There will also be compliance auditors to ensure compliance of the requirement of the REC by the participants of the scheme.