The Central Electricity Regulatory Commission(CERC) has released the final order for the reduction of the REC prices(Third Amendment). With this, CERC has removed one of the major obstacles that prevented Obligated Entities(OEs) from buying Solar RECs. The CERC had released a draft proposal in October 2014(more details here), and after taking the inputs from the stakeholders, the revision has been made. The details of the floor and forbearance price are as follows.
Vintage Multipliers have also been introduced to protect the interest of the developers who are already developing projects under the REC mechanism. All the projects registered prior to the order date(30 December 2014) will receive 2.66 RECs for 1 MWh of energy as against 1 REC for 1 MWh for others.
At the end of the December 2014 trading session, the solar REC inventory stood at 5.87 Lakhs, and this inventory instantly increased to 15.6 Lakhs as a result of the Vintage Multiplier of 2.66.
The order is a welcome step, but another major problem – the lax enforcement of the Renewable Purchase Obligations – still remains unaddressed.
The order can be downloaded here.
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It’s good for buyers and may be bad for developers and sellers. Government is not expected to go back on its commitment or promise, since the last 2012-13 REC price was committed to continue until 2016-17, where upon revision was envisaged. But this downward revision may be a slash on developers’ ROI calculations.
However, let us hope this action would increase the soalr REC trading in the power exchange market forum.
Thanks
Dear Mr. Venugopal,
Developers who have already registered REC projects are compensated in the form of multipliers, which means that their revenue will remain unaffected if they are able to sell their RECs.
Despite the downtrend for bid clearibg prices, few Govt. organizations are seen interested in REC sale model, like DIAL.
whatever attractive in price is of no avail until RPO is enforced at various strata .
Downward revision of REC prices, before 2017 (as fixed by Central Govt.) is adversely effecting bankability of Solar Projects. Domestic and International funding agencies are reluctant to fund Solar REC projects, due to unstability of govt. revising prices before stipulated time.
Its a serious issue and shall be considered by ministry in the interest of Solar Enterpreneures at the large.
CA Yogesh Birla
Director
Birla Wealth & Project Management Co.
(Solar Project Div.)