Urja Gyan

  Renewable Energy Certificates

1.         Central Electricity Regulatory Commission (CERC) has introduced Renewable Energy Certificate (REC) concept, which is a market based instrument, to fulfill the obligation of Distribution Companies in respect of renewable power.  Both the Energy Exchanges in the country have started trading the RECs to the DISCOMs and other obligatory entities from March 2011. 

2.         Basically, Renewable Energy project developer has got following two options –

a)     To Sell the power at a preferential tariff;

b)     To sell the power on a Pooled Cost basis to DISCOMs and sell the RE Certificates separately through Exchanges.

3.         Conceptually, this instrument was borrowed from CERs.  Though Electricity Act, 2003 does not define renewable part of the electricity, but MNRE has defined certain categories of power as renewable power for which a separate tariff is determined by the State Regulator, such as (a) Wind power (b) Biomass power (c) Hydel power with less than 25 MW and (d) Solar power.

4.         Few of the project developers have been encouraged to sell renewable power to the market and also sell renewable energy certificates through Exchanges.  All the Regulators have now defined that the power taken by DISCOMs should have minimum percentage of renewable power which is varying from state to state.  For instance, Maharashtra and Gujarat have got 9%( including solar of 0.5%)  of the renewable power obligation, whereas few states, like Jharkhand and Bihar have got less than 2%. Mumbai does not have renewable power as such for the following reasons:

(a)  The wind power have got noise pollution and birds would migrate;

(b)  Biomass power requires a good tract of land which is not available in Mumbai;

(c)   Solar power has got chemical disadvantages

5.         Thus, all three Distribution Companies of Mumbai are buying renewable power of some quantum from state based renewable power project developers at a tariff determined by the regulator and remaining quantum they are buying through renewable energy certificates and the cost of buying such certificates are passed on to consumers.  For environmental point of view such steps are welcome but the problem is that Mumbai has become the first place in the country which is buying huge quantities of RECs.  One RE of 1000 units cost Rs.1500/-, which is equivalent to Rs.1.50 per unit and in a preferential rate, buying 9% of RE would increase the cost of the power procurement substantially, say by 2 to 3% . Similarly for solar the cost of these certificates are Rs9300 and for 0.5% the cost increase by around 1%

7.         Secondly, even buying renewable power at a preferential tariff except for biomass, other power like wind comes into rainy season and solar comes into day time.  One more anomaly is that on the basis of legal opinion, CERC asked Open Access consumers to buy REC without framing the law and only regulation has been passed.  The second is that electricity component  in the renewable energy constitutes  only 60% and 40% is from other sectors like transportation etc.  There is no burden on transportation, aviation, mining and other sectors which are equally responsible for emissions .  Further for offgrid power there is no control of Regulators . For instance country uses around 10,000 Mw of diesel which also emit carbon but does not entail RECertificates .

8.         The country does not have a Renewable Energy law or Renewable Energy Regulator.  Electricity component is taken care by Electricity Regulator Commission, as Reliance Infra has in its clarification said that the tariff is determined by regulator and it is high time that regulator be asked to be consumer friendly and stall the RPO for the Mumbai till other states also follow the suit.  Maharashtra can make representation to MERC and forum of Regulators to stall the Renewable Power Obligation till maturity takes place and thus will save burden on the consumers of Mumbai.

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