Trends in REC trading for solar and wind projects
Renewable Energy Certificates (RECs) are a key mechanism for promoting the use of renewable energy in India. The system works by enabling renewable energy generators to sell their electricity as two separate commodities: the physical electricity and the environmental attributes associated with it. The environmental attributes are known as RECs, and these can be bought and sold independently of the physical electricity. In this blog article, we will discuss the trading of RECs in Indian solar and wind projects, and the compliance for Renewable Purchase Obligations (RPOs) by DISCOMs.
RECs in Indian Solar and Wind Projects:
Solar and wind projects in India are eligible to participate in the REC mechanism. The system works by generating one REC for every 1 MWh of renewable energy generated by a solar or wind project. These RECs can then be sold on the power exchange, where buyers can purchase them to meet their RPO obligations. The prices for these RECs are determined by the demand and supply on the exchange.
Compliance for RPO by DISCOMs:
Renewable Purchase Obligations (RPOs) are mandates for DISCOMs to purchase a minimum percentage of their electricity from renewable sources. These mandates are set by the central and state regulatory commissions, and DISCOMs must meet their RPO obligations to avoid penalties. DISCOMs can purchase RECs to meet their RPO obligations, and the prices for these RECs are determined by the demand and supply on the exchange.
RECs Annual Volumes and Price Trends:
The table below summarizes the annual volumes of RECs traded in India for solar and wind projects from 2016-2021, and the price trends for these RECs.
| Year | Solar RECs Traded (in lakh) | Wind RECs Traded (in lakh) | Average Price of Solar RECs (INR/REC) | Average Price of Wind RECs (INR/REC) |
|---|---|---|---|---|
| 2021 | 13.47 | 17.60 | 3,200 | 1,000 |
| 2020 | 12.02 | 17.45 | 2,400 | 1,000 |
| 2019 | 7.94 | 12.05 | 2,900 | 1,200 |
| 2018 | 5.36 | 6.27 | 1,300 | 1,200 |
| 2017 | 4.80 | 5.09 | 1,500 | 1,400 |
| 2016 | 2.87 | 3.05 | 3,500 | 1,500 |
Note: The above data is sourced from the Power System Operation Corporation Limited (POSOCO) and the Central Electricity Regulatory Commission (CERC). The average prices shown are indicative and may vary based on market conditions.
The trading of RECs in Indian solar and wind projects has become an important mechanism for promoting renewable energy in India. DISCOMs can use RECs to meet their RPO obligations, and the prices for these RECs are determined by the demand and supply on the exchange. The annual volumes and price trends of these RECs demonstrate the increasing demand for renewable energy in India and the importance of the REC mechanism in achieving the country’s renewable energy goals.