Various stakeholders had raised concern about the bankability of renewable energy project under REC mechanism because of high risk perceived by the bankers/ financial institutions. The key constraint identified by them was the lack of visibility of revenue under the REC mechanism as the floor and forbearance price band had been announced for 5 years upto 31.03.2017 and beyond which there was no clarity on the evolution of the price band. The stakeholders were aware that in all likelihood this would be revised downwards as was done once, but the magnitude of the decline was not known.
They requested for clarity in this regard which was essential for investment certainty in this mechanism. From the point of view of the investors and bankers / financial institutions, the floor and forbearance price set by the Commission should be at least up to loan period i.e. 10 to 12 years to facilitate easier availability of loan for renewable energy projects under REC mechanism.
Considering the above, the Commission vide its Suo-Motu Order dated 30.9.2014 (Petition No.SM/016/2014) invited comments / suggestions/ objections of the stakeholders (vide public notice No.L‐1/12/2010‐CERC dated 30.09.2014) on the following proposal pertaining to forbearance price and floor price for the Solar REC by 30.10.2014.
- Solar REC Floor price for the Solar projects commissioned on and after 1.4.2014: Rs. 3500 / Certificate
- Solar REC Forbearance price for the Solar projects commissioned on and after 1.4.2014: Rs. 5800 / Certificate
Solar projects that sell the electricity generated to the distribution licensee of the area in which the eligible entity is located, at the pooled cost of power purchase of such distribution licensee as determined by the Appropriate Commission, shall be issued Certificates, for one Megawatt hour of electricity injected into the grid, considering following Vintage Multiplier (VM) :
| Year of Commissioning | Multiplier |
| 2013 | 1.47 |
| 2014 | 1.19 |
| 2015 | 1.00 |
- Solar projects that sell the electricity generated to any other licensee or to an open access consumer at a mutually agreed price, shall be issued Certificates for one Megawatt hour of electricity injected into the grid, considering following Vintage Multiplier (VM) :
| Year of Commissioning | Multiplier |
| 2013 | 0.74 |
| 2014 | 0.60 |
| 2015 | 0.50 |
- Solar projects which are CGP shall be issued Certificates for self consumption of one Megawatt hour electricity generated and self consumed. considering following Vintage Multiplier (VM) :
| Year of Commissioning | Multiplier |
| 2013 | 0.74 |
| 2014 | 0.60 |
| 2015 | 0.50 |
- The Vintage multiplier based on the above shall be provided for a period of 12 years, from the year of commissioning.
The proposed Vintage Multipliers are derived based on the formulation as provided in the Regulation 7 of the Central Electricity Regulatory Commission (Terms and Conditions for recognition and issuance of Renewable Energy Certificate for Renewable Energy Generation) (Third Amendment) Regulations, 2014. This will be reviewed every year and on such review the revised multiplier shall apply for projects commissioned in the respective years.
“The following new clauses shall be added under Regulation 7 of the Principal Regulations as under:
(7) The Commission shall determine through separate order, the quantum of Certificate to be issued to the eligible entities being solar generating companies registered under REC framework prior to the date of effect of these Third REC Amendment Regulations, for one Megawatt hour of electricity generated and injected into the grid or deemed to be injected (in case of self consumption by eligible CGP) into the grid as per the following formula:
Vintage Multiplier=Floor Price of Base Year / Current Year Floor Price
Where,
i . “Base year” means the year 2012-13 being the year in which the floor price was determined for solar REC for a period of five years”
(8) The vintage multiplier as specified in clause (7) of this regulation shall be provided to the solar generating companies registered under REC framework prior to the date of effect of these Third REC Amendment Regulations, for the period upto 31st March, 2017 after which such projects shall be eligible for one REC for one megawatt hour of electricity generated unless and until provided otherwise.”
Based on the above and the principles adopted under the REC regulations, the Vintage Multiplier shall be as stated in the table below:
Vintage Multiplier – Solar 2.66
The above vintage multiplier shall be provided to the solar generating companies registered under REC framework prior to the date of effect of the Third REC Amendment Regulations, for the period upto 31st March, 2017 after which such projects shall be eligible for one REC for one megawatt hour of electricity generated. In other words, the solar generating companies registered under REC framework prior to the date of effect of the Third REC Amendment Regulations would be eligible for 2.66 REC for one megawatt hour of electricity generated and injected into the grid and this dispensation would be available to such projects for the period upto 31st March, 2017, after which the said projects would be eligible for one REC for one megawatt hour of electricity generated.
3. The Commission has received a number of comments from stakeholders in this context. Some of the stakeholders who commented on the proposal of multiplier for REC projects based on open access route, argued that several such projects have been set up after the introduction of REC framework. Such investment, especially those made in the solar segment have got financing based on the projected revenue stream on account of electricity sale as well as REC sale. Tinkering with this proposal would not only make such projects unviable but would also send a wrong signal for future investment.
As regards the compensation to such projects selling electricity through open access route, it may vary depending upon the nature of RE technology and the consumer tariff prevailing in a particular state.
The Commission believes that not many projects are likely to come up on a long term basis based on contract for sale of electricity component through open access route. Also, with due regard to the fact that the revenue/compensation by sale of electricity component might vary based on technology, consumer tariff prevailing in a state, it is felt that the existing provision relating to eligibility of such projects for REC be allowed to continue. As such, the Commission has decided to keep in abeyance, the proposal of separate multiplier for RE projects based on open access route.
- Vintage Multipliers for self-consumption by Solar projects which are CGP
Commission’s Proposal :
Year of Commissioning Multiplier
2013 0.74
2014 0.60
2015 0.50
Analysis and Decision
Several stakeholders have commented on the proposal for introduction of multiplier for REC projects based on captive consumption or open access route. The comments vary depending upon the stakeholder’s interest.
It also remains a fact that there is a huge inventory of REC in the market today, contributed largely by the CGPs. Around 50% of the total number of projects accredited/registered under the REC framework belong to CGP, and a good majority of them are CGPs set up prior to the introduction of the REC framework. Even in cases where some CGPs have been set up after the introduction of REC scheme, it is highly unlikely that such projects would have got financing based on the revenue from REC scheme
The Commission intends to review the provision regarding eligibility of CGP for REC. However, as this proposal was not floated for public comments as part of the present regulatory dispensation, the Commission directs the staff to come out with a fresh proposal in this regard. Till such time, the present proposal of the Commission for introducing multiplier (0.5 REC for 1 MWh of electricity generated) for CGP is being kept in abeyance.
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