Indian electricity commission cuts price of Renewable Energy Certificates

The NTPC's involvement in the Bhadla Solar Park is a boon for PV development in Rajasthan.

India’s Central Electricity Regulatory Commission (CERC) has put forward draft proposals to bring down the cost of its Renewable Energy Certificates (REC) to more affordable levels in a move designed to bolster distributed companies’ (DISCOMs) ability to meet their renewable obligations.

Solar RECs are set to fall to INR 1 per unit ($0.015/unit) for a typical floor price, down from INR 3.5 per unit ($0.05/unit) currently. CERC has also confirmed that the forbearance cost for solar RECs (the difference in price between CERC-controlled certificate prices and those typically paid on the market) will be reduced from INR 5.8 per unit to INR 2.5 per unit ($0.04/unit).

India’s power DISCOMs are mandated to meet government-set renewable energy purchase obligations, but have been hampered by the relatively high costs of the RECs, allied to straitened cash flow. Lower REC prices will enable more and more DISCOMs to support the booming solar industry, CERC hopes. Utilities that cannot meet current green power obligations are able to purchase the RECs, which represent the equivalent of 1 MWh of clean energy.

The RECs are traded as a commodity on India’s power exchanges, and are available at different prices for different renewable energy technologies.

The lower solar REC costs are a reflection of record-low PV prices in India, which fell to INR 3.30/kWh ($0.0494/kWh) in the state of Madhya Pradesh last month, and have been on a sharp downward trajectory for some time as global module prices continue to fall.

“Due to a reduction in the capital cost of solar projects, tariffs have declined considerably,” CERC remarked in its REC draft proposal filing last week. “The average bid tariff in auctions in January 2016 to February 2017 has been INR 4.65/kWh.”

India’s National Solar Mission targets a cumulative solar capacity of 100 GW by 2022, with total renewable capacity targeted to be 170 GW by that date. The latest data published by the Ministry of New and Renewable Energy (MNRE) puts India’s renewable energy penetration at 16.1%, of which solar accounts for 18.2%. Overall, solar meets 2.9% of India’s energy needs, with wind at 9.2%.

In terms of gigawatt capacity, renewables in India comprise 50.7 GW of the nation’s 315.4 GW of installed power capacity, the data shows. Cumulative solar capacity in India is 9.23 GW – a figure that is expected to almost double by the end of 2017.