The CERC Reduces Indian Renewable Energy Certificate (REC) Prices By 15.38% To 17.88%

Author:Ms Michelle Davies
Profession:Eversheds
 
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Originally published 26 August 2011 Further to our bulletin on 28 June 2011 outlining the proposed changes to REC prices, the CERC has indeed confirmed that it is to reduce REC prices by 15.38% to 17.88%. The reduction will certainly knock investor confidence to some extent but the floor price has been reduced to the extent originally announced. The market tends to be more influenced by the floor price than the forbearance price (ceiling price). The Order The CERC has announced the revised price bands for RECs for 2011 / 2012. The new price bands will be applicable from 1 April 2012. The floor price of the non-solar RECs will be the same as announced (ie INRs 1,500 per MWh) whereas the forbearance price of non-solar RECs will be reduced to INRs 3,300 per MWh. The Commission, in its order dated 1 June 2011, had proposed to reduce floor price to INRs 1,400 per MWh (from current Rs 1,500 per MWh) and forbearance price to INRs 3,480 per MWh (from current INRs 3,900 per MWh). For solar RECs, both floor price as well as forbearance prices have been revised. The floor price has been reduced to INRs 9,800 per MWh (from current INRs 12,000 per MWh) and the forbearance price has been reduced to INRs 13,690 per MWh (from current Rs 17,000 per MWh). The revised prices are in-line with those proposed in the 1 June 2011 order. At the public hearing held on 19 July 2011, industry representatives opined that the market is more sensitive to changes in reduction of the floor prices of RECs as compared to forbearance prices. The new prices shall remain valid until 31 March 2017. Setting REC Prices The CERC is permitted (in consultation with the Central Agency and Forum of Regulators) to specify floor and forbearance prices for RECs from time to time by the Central Electricity Regulatory Commission (Terms and Conditions for recognition and issuance of Renewable Energy Certificate for Renewable Energy Generation) Regulations (Regulations). The Regulations specify a number of principles which the CERC should take into consideration when setting the floor and forbearance price, including: variation across states in the cost generation of different renewable energy technologies under the categories of solar and non-solar variation in the...

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