Its electricity regulator, the Central Electricity Regulatory Commission (CERC), launched the Renewable Energy Certificate (REC) mechanism in November.
Under the system, a utility or power producer that exceeds its renewable-energy targets fixed by state-level regulators will be able to sell surplus certificates to utilities that fail to meet their goals. The Renewable Portfolio Obligation, which stipulates the amount of electricity to be generated from renewable sources, is set between 1-10% of the total installed capacity of a state.
A state with little or no installed renewable energy can now buy RECs from renewables-rich states such as Rajastan and Tamil Nadu.
The certificate value will be equivalent to 1MW of electricity fed into the grid from renewable sources. These certificates can be traded only in the power exchanges approved by the regulator and within a price range it determines from time to time.
The agency responsible for power system integration, Delhi-based National Load Despatch Centre, will implement the RECs. The agency will also register eligible companies, issue certificates and manage accounts.
To be eligible under the REC framework, renewable projects must be accredited by the state agency and have no power purchase agreements (PPAs) at a preferential tariff with distribution utilities. Existing projects with long-term PPAs in place will be able to participate after they expire.
"The REC brings a market-based mechanism that will help integrate renewables even more closely with mainstream power, and allows all regions an equal opportunity to meet their Renewable Portfolio Obligations," says T F Jayasurya, a spokesperson for Indian Wind Turbine Manufacturers Association. "The REC is forward-looking and will in the long run lead to growth of wind energy in India."
Tulsi Tanti, chairman of Suzlon Energy, says: "This would translate into inclusive and sustainable socio-economic growth for the country." But Deepak Gupta, new and renewable energy minister, cautions that the RPO must be enforced to make the REC work.
Bikram Singh, assistant vice-president of the India Energy Exchange, adds that the project will take at least two years to mature. "Financing is the biggest hurdle. Financiers may be happier with a fixed base and may feel their investment is jeopardised since REC is a market-based mechanism," he says.
Renewable-energy certificates were prescribed in the National Action Plan on Climate Change, which contains a target for renewables to make up 5% of the energy mix by 2010 and 15% by 2015.