The REC market in India is all set to regain its importance owing to proposed new reforms and governance
The concept of Renewable Energy Certificate (REC) is indeed a must needed and useful instrument to fulfil the supply and demand of the renewable energy obligation by the obligated entities not only in India but also across the world as they are independent of the geographical boundaries of the states. Presently, the solar REC mechanism is going through rough patches and not delivering results as expected because of certain reasons which are primarily linked to weak regulatory enforcement and sudden drop in solar tariffs in the country.
In the last two years, we have witnessed a decent investment and increase in installations of solar projects under REC mechanism which is around 19-20% with more than 460 MWs of the total solar installations in the country. Ujjas is among the leading developers,integrators and park owners in the country with around 105 MWp of installations done in this period with 23% market share.
With the change in the government and proposed new reforms in the Electricity Act in place, in terms of enforcement and penal provisions for new compliance, the REC market will regain its importance in the country. If we see the statistics under the national and state policies with preferential tariffs for around 2800 MWs (including recent awards under JNNSM Phase – II,Batch I) the total developers are around 480. However, in just 460 MWs of solar PV projects under REC mechanism there are 205 developers/projects.
In the last couple of months, serious efforts have been seen from some of the state regulatory commissions and the MoP to ensure compliance of RPO and its enforcement. These state regulators have given clear orders for the compliance of Renewable Purchase Obligations (RPO) and deficit RPO by the purchase of RECs, considering the impact of purchase of RECs in the tariffs itself and imposing financial penalties on the concerned authorities for non compliance of order as seen in the case of Uttrakhand.
The ministry has proposed the repackaging of the REC prices with the Vintage Based Multiplier (VBM) to safeguard the financial interest of the older investors and making basic changes in the Electricity Act itself. The forum of regulators has also shown their concern for the non compliance and with consensus has agreed for the enforcement and penal actions for non compliance and incentivising for the compliance beyond targets.
With the reduction in availability of coal and coal linkage, in the tropical country of India solar is going to increase further.With the increasing tariffs of fossil fuel based power year after year and decreasing cost of power from captive renewable energy source especially solar, the demand has increased manifold. Apart from large ground mounted plants, demand for large, medium and small roof top solar PV power plants has also increased.
The ministry of power after the release of the regulation 259 in the matter of technical standards for the distributed generation and the net metering concept and guidelines by the Forum of Regulators which has been implemented in many states now,grid connected roof top solar power plants are now picking up.Most of the educational institutions, hospitals, manufacturing establishments and government offices and buildings are going ahead with roof top solar PV system with net metering.
Ujaas being a pioneer in this field also has the fist grid connected commercially owned solar PV power plant with the facility of net metering successfully operational in India under the allocation from SECI-II in Hyderabad. With the same concept the company is now executing for leading private and public sector companies, schools, colleges, hospitals etc., pan India with some of the big names like NTPC, NALCO, AVON Cycles etc.Private solar parks are another upcoming trend. The concept of private solar parks was an innovative concept in solar PV which Ujjas Energy started couple of years back. The service includes providing to the investor everything from the land to the installation, to the integration and connectivity to the grid through a common transmission facility. The additional integral service they provide is identification of power buyer and third party power sale complete operations, maintenance and monitoring for the entire life of the project.
Normally, in a state bid or national level bid the minimum quantum of bid to be made is around 10 MWs and to be competitive in the reverse auction, which is the latest trend in the country, the minimum size to make it feasible is around 25 MW.
That is a huge investment and the entire capacity is distributed among the few selected ones. However, in the park concept under REC mechanism it gives the liberty to invest even a small amount as 500 KW to as much as one wants at a viable cost. Thus, this encourages more number of investors to invest in the solar business.
Vikalp Mundra
Joint Managing Director
Ujaas Energy Ltd