Renewable Energy Certificates

Overview

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. One REC (Renewable Energy Certificate) represents 1 MWh of energy generated from renewable sources. 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.

Features of REC

RECs are tradable, intangible energy commodities which represent the attributes of electricity generated from renewable resources

  Participation

 Voluntary / RPO Compliance

 REC Denomination

 1 MWh

 Validity

 1095 Days after issuance

 Categories

 1. Solar REC
 2. Non-Solar REC

 Trading Platform

 Power Exchanges only

 Banking

 Not Allowed

 Borrowing

 Not Allowed

 Transfer Type

 Single transfer only, repeated trade of the same certificate is not possible

 Penalty for Non-compliance

 ‘Forbearance’ Price (Maximum Price)

 Price Guarantee

 Through ‘Floor’ Price (Minimum Price)

Source: IEX

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