The Central Electricity Regulatory Commission(CERC) has released the final order on the REC forbearance and floor prices for Solar and non-Solar RECs. This follows the draft order released earlier in March 2017(more here) and the subsequent feedback from the industry stakeholders. The new price range, effective from 1st April 2017 till further notice, is as follows.
|Non-Solar REC (Rs.MWh)||Solar REC (Rs./MWh)|
In terms of long term impact, REConnect expects only a marginal increase in REC demand – the reduction in REC prices will stimulate demand, but anticipation of further reduction in the REC prices will offset the demand.
An unfortunate part of this whole exercise has been that the Obligated Entities(OEs) who failed to meet their RPO benefit from this tariff revision since there is no provision to penalise them. On the other hand, the good OEs who did in fact abide by the regulations are looking like losers. One of the comments reproduced from the order is as follows ” The benefit of the price reduction will primarily go to those obligated entities that have not followed the requirement of law so far and have not fulfilled their RPO obligations. Such obligated entities will benefit as they can meet their past obligations at much lower cost. ”
To the above comment, the CERC answered that ” The Commission is of the view that the price of trading must also reflect the current market situation. If the green component is unreasonably priced, the obligated entities would get further disinterested from the REC market, and the REC inventory will continue to pile up. Hence, the REC price must move with the market price of renewable power. ”
While CERC’s comment is also true, the net effect is that the defaulting OEs have benefited due to lack of enforcement. Well, no surprises there.
The entire final order along with the feedback and the arguments made by the stakeholders can be accessed here.
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