Monday, April 18, 2011

REC Framework - Emerging alternative opportunity to avail carbon benefits for Green Generators

REC (Renewable Energy Certificate) is a tool to implement Renewable Purchase Obligations (RPOs) for buyers like state electricity distribution utility, open access users and captive generators from conventional sources from sellers of renewable energy generators. It is an environmental commodity that:
  1. captures the environmental benefits of renewable electricity generation
  2. provides a market mechanism to incentivize Renewable Energy producers
  3. Market is created through requirement on the various companies to have % RE in portfolio

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. One REC is created when one megawatt hour of electricity is generated from an eligible renewable energy resource.

A good question to ask is what is benefit of REC over CDM? Are they competitors and which one is more applicable for an investor to choose from? Some of these questions are getting answered in another blog - Renewable Projects in India: What to adopt-CDM or REC?

The emerging RE market with potential 4000MW per year for next 10 years and increasing RPO share with 1% annual increment from current 5% to 15% by 2020 will make the REC instrument interesting in coming time. It could become a good tradeable market instrument with easier processing and validation then CDM with global securitization with standard carbon financial products. As of date REC price stands at Rs. 1500/3900 (min/max) for non-solar REC and Rs. 12000/17000 for Solar REC.

Its an emerging market driven financial incentives, which if rightly enforced will take India closer to its National Climate Change missions.

Post by Rahul Bagdia @ pManifold
Data and presentation supported by domain partner of pManifold - Agneya Carbon Ventures. More could be read on RECs on Agenya blog.

No comments:

Post a Comment