Understanding RECs

Presentation by

Agneya Carbon Ventures

http://www.agneya.in

Concept of REC

o India’s response to climate change negotiations has 8 national missions and 2 other

missions

National Missions

▫ National Solar Mission

▫ NM for Enhanced Energy Efficiency

▫ NM on Sustainable Habitat

▫ National Water Mission

▫ NM for Sustaining the Himalayan Ecosystem

▫ NM for a “Green India”

▫ NM for Sustainable Agriculture:

▫ NM on Strategic Knowledge for Climate

Change

Other Missions

▫ Retirement of inefficient coal-fired power

plants and R&D on IGCC and supercritical

▫ Renewable Purchase Obligation – to increase

the % component of RE in Grid

REC is a tool in the implementation of Renewable Purchase Obligation

Concept of REC

o Renewable Energy Certificates is therefore an environmental commodity

o Captures the environmental benefits of renewable electricity generation

o Provides a market mechanism to incentivize Renewable Energy producers

o Market is created through requirement on the various companies to have % RE in portfolio

o One REC is created when one megawatt hour of electricity is generated from an eligible renewable

energy resource

Mode of Generation (and

monetization)

Electricity revenue Environmental benefit Total

Conventional Yes Not present Conventional Tariff

Renewable without REC Yes Not captured separately Preferential Tariff

Renewable with REC Yes Captured as REC Tariff + REC Sale

Monetization of Electricity in different cases

Eligible Renewable Energy Sources

Wind, Solar, Small Hydro (below 25 MW of capacity), Biomass based power

generation (including co-generation), Bio-fuels and Municipal solid waste based

power generation projects are eligible to apply for REC.

Why RECs

• Renewable energy resources are unevenly spread unevenly across the country,

concentrated only in a few states.

Location of RE generation is irrelevant. Fulfilling RPO for each state can happen through generating or

buying share of it’s energy from RE resources (as RECs)

States lacking in resouces can buy REC attributed to RE generated by different RE generators to fulfil RPO.

Market for RECs

There will be market for RECs since

• Renewable energy purchase target for FY09-10 = 5% against Previous year level = 3.5%

• Renewable purchase obligation to increase by 1% per annum for next 10 years – 15% by

2020

• 4000 MW of incremental RE power to be installed per year for next 10 years

• Legally mandated for the distribution companies across the states under the Electricity

Act 2003 – enforcement through the State Electricity Regulatory Commissions (SERCs)

How will the RECs market work

Registration Process Timeline

Application accompanied with fees and charges

Process of Registration

Grant of Registration

Furnishing the Central Agency

requested details by the applicant

Intimation regarding Incompleteness of

application

Payment of

applicable

registration

Charges

2 days

7 days15 days 15 days

3 Months

Who can sell RECs

Accreditation Registration Issuance Redemption

RE Generators that have undergone the process as shown above can earn and

monetize the RECs

Who must buy RECs

• State electricity distribution companies

• Open access users

• Captive generators (from conventional sources)

• Others obligated entities

Prices for RECs

• Prices will become stable after a few rounds of trading.

• Till then minimum and maximum prices are set by CERC

for solar and non-solar RE sources as under

Parameters Non Solar REC Solar REC

Forbearance Price (Rs/MWh) 3900 17000

Floor Price (Rs/MWh) 1500 12000

Players in the REC market (1/2)

MNRE : It is a facilitating agency for REC mechanism in India

Forum of Regulators: It is a common platform for all electricity regulators in India. Itcoordination and implementation body for REC mechanism in various states of India.

CERC: It is responsible for regulatory framework for inter-sate transactions.

SERC : It is responsible for regulating intra-state transactions.

State agency: It is an agency designated by SERC within the regulated state. Stateagency is responsible for accreditation of RE generators, certification of RE inconsultation with Sate Load Dispatch Centre (SLDC) for the purpose of issue of REC.

State Load Dispatch Centre: It is engage with metering, energy accounting of the energybeing generated and consumed within a state. Hence, providing accurate data on REgeneration and consumption in a state.

National Load Despatch Centre– It is designated as central agency. Main work includes;Registration of eligible RE generators for issuing REC, Issuance of REC to RE generators,Accounting of RECs, Tracking of REC in its lifetime, Extinction of REC after its sale, Provideinformation to compliance auditor.

Power Exchange – REC can only be traded in power exchange. Hence to provide tradingand to facilitate trading of REC.

REC consumers (Obligated Entities/Voluntary buyers) – These are the entities who buyREC as per RPO (or Voluntarily )as mandated by concerned SERC. Obligated entities aregenerally distribution companies in states.

RE Generators - They are the generating plant whose inputs to the energy generationare from renewable sources.

Compliance Auditors : It is a third party appointed by CERC for accessing the complianceof REC regulations.

Players in the REC market (2/2)

Agneya Can

We are

• A focused renewables, carbon and sustainability management consulting firm.

• Established by alumni of IIM-A and IIM-B with background in engineering from

NIT-Trichy and experience across production, pharma, banking and sales

• Young, dynamic team which has in a short span of time has undertaken and

delivered projects across private and government sectors

• With clientele in process industry, sugar industry, real estate, infrastructure,

waste treatment, electronics and auto/auto ancillaries.

We Offer

• Offer a unbiased view of the investment opportunities across sectors,

technologies and opportunities

• Assistance in achieving financial closure

• Handholding right from initiating project with strong technical advisors right upto

commissioning stage

• Registration of projects under Clean Development Mechanism (CDM) and

Renewable Energy Certificates (RECs) – Trading of CERs/RECs

We look forward to hearing back from you.

Reach us at

Kedar - +91-9665407848 – kedar@agneya.in

Indrajeet - +91-9028788430 – indrajeet@agneya.in

http://www.agneya.in

http://blog.agneya.in