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Home News Power Sector News Move to extend REC validity beyond 1 year

Move to extend REC validity beyond 1 year

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CERCWhen the Renewable Energy Certificate regime came into effect last year, it was generally believed that the proceeds from selling the certificates to those obligated to buy green power would form a meaningful stream of income to wind, biomass and solar energy producers. But the trading in the last few months has belied the faith. In the trading session of December, 19 lakh RECs were available, of which less than 3 lakh were traded. The Central Electricity Regulatory Commission recently took note of the "reluctance and/or apathy" on the part of the electricity distribution companies to buy the RECs to meet their renewable purchase obligations. The RECs have a shelf life of 365 days from the date of issue and any certificate not sold expires on the 366{+t}{+h} day.

Against this, the CERC has floated an idea of extending the validity of RECs beyond one year and has put it up for comments. This, the Commission believes, will give the renewable power generators "sufficient time and opportunity to trade the RECs at the power exchanges."

One fails to understand how extending the life of RECs will help their sales, in the absence of buyers. The answer to the problem is to enforce the obligations — more so because the defaulting 'obligated entities' are state-owned companies.

The Ministry of New and Renewable Energy seems to be buoyed by the perceived success of the National Solar Mission, which has certainly helped create solar consciousness across the country. Now, the Ministry is working on a National Biomass Mission, and has asked the industry to prepare a mission document. This need not be anything more than a bricolage of information in public domain basted into a document, for the details are already pretty much known. To recount, India produces 620 million tonnes of bio resources, and after allowing for fuel and fodder, the surplus is about 150 million tonnes. This can support 18,000 MW of power, not counting another 5,000 MW of co-generation, against which the existing biomass power capacity is only 2,665 MW.

Biomass energy is rendered unremunerative, largely because of rising fuel prices and various levies. Fuel, which by nature is cash-and-carry, has competing customers and the prices fluctuate. As for charges, a good example is Tamil Nadu, where 'scheduling charges' and 'system operation charges' were hiked recently from Rs 27 to Rs 2,000 a MW for the former, and Rs 500 to Rs 2,000 a day for the latter. In addition there is a 5 per cent 'electricity duty'.

This makes selling biomass power directly to customers uncompetitive. If the generator were to sell power to the state electricity utility, he gets Rs 4.70 a unit, which is straightaway a loss making proposition.

Biomass is 'base load', and firm power and needs to be encouraged over other forms of renewable energy. It is also the least expensive. To set up 1 MW of capacity, it takes Rs 5.5 crore, against Rs 6.5 crore for wind and Rs 9 crore for solar. Each MW capacity of biomass produces 8.5 million units of electricity a year, against 2.4 m u for wind and 1.7 m u for solar, under good conditions.

These are the issues that an association of biomass power producers took recently to Farooq Abdullah, Minister for New and Renewable Energy. He directed them to prepare a document for National Biomass Mission.

Source - Hindu


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