The Renewable Energy market is booming because of its vitality and utility every which way be it ethically, morally or economically. India has been highly ambitious in declaring its Nationally Determined Contributions (NDCs) under the UNFCCC and Paris Agreement. It has been committed towards limiting its carbon footprint and switching towards cleaner and greener sources of energy. India...
The Renewable Energy market is booming because of its vitality and utility every which way be it ethically, morally or economically. India has been highly ambitious in declaring its Nationally Determined Contributions (NDCs) under the UNFCCC and Paris Agreement. It has been committed towards limiting its carbon footprint and switching towards cleaner and greener sources of energy. India has been ambitiously enhancing its NDCs which clearly demonstrates its commitment at the highest level for decoupling of economic growth from greenhouse gas emissions.
India is targeting net-zero emissions by 2070[1] and is committed in securing the same. The world has been realizing the viability and need to gradually shift towards Renewable Sources of Energy. The concepts like Renewable Energy Certificates (RECs) and Carbon Credits (CCs) are nothing but a manifestation of this need to shift towards Renewable Sources of Energy. These concepts were introduced and incorporated to revolutionise the market and make the shift towards Renewables more lucrative and rewarding.
At this juncture it wouldn’t be wrong to say that the future is electric and we are making our gradual shift towards a modern electric world driven by Renewable sources of energy. RECs are instruments for the obligated entities to meet their Renewable Purchase Obligations (RPO). They are market-based instruments certifying that the holder owns and has generated one megawatt-hour (MWh) of electricity from a renewable energy resource. The REC can be sold on the open market as an energy commodity after the quantum of power has been fed into the grid, RECs are currently being traded on India Energy Exchange and Power Exchange India Ltd., basically in two segments Solar and Non-Solar on the last Wednesday of every month.
There was a lot of hue and cry when the CERC (Terms and Conditions for Renewable Energy Certificates for Renewable Energy Generation) Regulations, 2022 (“REC Regulations 2022”), were tabled. Now with the coming in force of the REC Regulations, 2022 from 05.12.2022, the debate yet again precipitated to the forefront. The basic point of discontent among the REC holders is the lack of farsightedness behind the REC Regulations, 2022 as once the floor and forbearance price are done away with the already tanking REC market will tank further and the entire purpose behind the introduction of the RECs along with their viability will fade away.
Much seems to be changing in the Renewable Energy market and all doesn’t seem as rosy as it should have been. A division bench of the Hon’ble Delhi High Court comprising of Justice Vibhu Bakhru and Justice Purushaindra Kumar Kaurav vide their order dated 20.12.2022 in W.P.(C) 15477/2022 & CM APPL 48145/2022 have stayed the trading of RECs for a period of six weeks.
Various provisions of the Electricity Act, 2003 (“EA 2003”) like Section 61 (h), 86 lay emphasize on the use and promotion of Renewables in the generation of electricity, in order to make the power market more sustainable and less dependent on the non-renewable sources of energy.
The REC Regulations 2022 provide that the Renewable energy generating stations, the Captive generating stations based on renewable energy sources, the Distribution licensees and the Open access consumers are eligible for issuance of RECs.
The REC Regulations 2022 have made it amply clear that the capacity of a generating station is eligible to be considered for REC if that capacity is not tied up for sale to an obligated entity for RPO compliance. RPO and its compliance are under the purview of the State Electricity Regulatory Commissions (SERCs) and hence, that has to be dealt with in accordance with the direction of the SERCs.
The REC Regulations 2022 specifically provide that the RECs once used for RPO compliance will be considered redeemed and extinguished. With regards to the transfer of ownership of RECs the Central Agency (National Load Despatch Centre/ NLDC) as stipulated under the Regulations shall make suitable provision in the detailed procedure to keep record of such transactions until the RECs are extinguished from the Registry.
The principles specified in the Regulations and the detailed procedure that is to be issued by the Central Agency under Regulation 3 (2) of the REC Regulations 2022 after due consultation with all stakeholders would further strtengthen the required checks and balances in the system to make sure that proper accounting and transparency is achieved in the process.
Renewable energy is gaining centre stage as global attention on sustainability is increasing by the day. Renewable energy is being made more and more user friendly with the increasing advancements in the Renewable Energy sector. Renewable Energy Certificates are a very important facilitator playing a very important role in the renewable energy market and all steps need to be taken to make the renewable energy market in general and the RECs in particular more lucrative and rewarding so as to promote the usage of Renewables in the generation of electricity.
The author is an Advocate , views are personal.
[1] https://pib.gov.in/PressReleaseIframePage.aspx?PRID=1847812