Renewable energy certificates, battling declining demand, could be scrapped, officials said. The industry, however, sees a turnaround by 2017-18 and does not want the certificates to meet the fate of carbon credits
The market for these certificates, launched in 2010, crashed last year with over 10 million of them remaining unsold. Last month’s discovered price was Rs 3.5 per unit for solar certificates and Rs 1.5 per unit for non-solar certificates.
These prices are far below prevailing rates of solar and wind power. Of the 9.4 million certificates issued last month, 9.3 million were unsold.
A Supreme Court judgment last year empowered state electricity regulatory commissions to enforce clean energy targets and penalise captive power producers and open-access industrial consumers if they failed to meet them.
Since then 11 state regulators have issued orders, some directly imposing purchase of renewable energy certificates and others rejecting exemptions for not buying them.
Under a renewable energy purchase obligation, electricity distribution companies, open-access consumers and captive power producers must meet a part of their needs through green energy. States or utilities that are unable to fulfill their obligation can buy renewable energy certificates, which represents 1 MW-hour of power produced from a clean source. These certificates, divided into solar and non-solar, can be traded on power exchanges.
Touted as an alternative to carbon credits, the mechanism caught the industry’s imagination with companies setting up projects specially for the purpose.
Wind energy companies were first to jump in, followed by solar power producers and then other sectors like conventional energy, mining and steel. “The scrapping of the certificates could cause damage, given states are moving in the right direction,” said an industry executive.
Strengthening enforcement with proposed amendments in the Electricity Act could increase procurement,” said an industry executive.
He said as more states removed exemptions to the renewable energy purchase obligation, a substantial jump in the price of these certificates could be expected after 2017-18.
“The idea is to reform the certificate regime. Low demand has hurt it and a turnaround will take a while. We will also consider how to tackle defaulters,” an official said.
Around 1,200 projects are under the certificate mechanism with a total capacity of 5,383 MW. If large companies meet even 10 per cent of their renewable energy purchase obligation, a backlog of 17 million certificates will be cleared.
Source: Business Standard