India issues RECs to supersede subsidies

INDIA: Indian wind energy generators and other renewables firms have taken a step forward with first bids placed for renewable energy certificates (RECs) on the Indian Energy Exchange (IEX), the country's leading power-exchange platform.

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Policymakers hope channelling revenue to renewables businesses through certificate sales will boost productivity and wean firms off non-market subsidies.

In early March, just over 100 RECs had been issued by the National Load Dispatch Centre (NLDC), the body charged with certifying renewable energy projects for participation in the new market. The initial RECs were issued to six renewable-energy projects representing total generation capacity of 51.6MW.

A further 23 projects comprising 192MW were awaiting NLDC verification, having been accredited at state level but not yet approved by the NLDC. To be eligible for RECs, plants must have a minimum capacity of 250kW and have been commissioned no earlier than April 1, 2010.

Wind plants accounted for 75.6MW, or 31%, of the 243.6MW installed capacity either registered or awaiting registration by early March. This is slightly below the portion issued to co-generation capacity, which accounted for 35.3%. Biomass was in third place and there was a modest amount of small hydro-electric capacity as well. No solar projects have been registered and none appear to be awaiting validation by NLDC.

Wind plant operators must wait a while to see significant benefits, says IEX managing director and CEO, Jayant Deo. "Wind farms produce the most power from May to September, during the monsoons, and will begin accumulating certificates to sell during that season," he says. "Probably in the first quarter of next year, we should start to see a buzz in the market."

IEX will conduct RECs auctions on the last Wednesday of each month. The first was scheduled for March 30.

Rupa Devi Singh, managing director and chief executive of small electricity-trading service Power Exchange India Ltd (PXIL), is optimistic. "The RECs, as a market mechanism, should help renewable energy generators to bypass the feed-in tariff system, allowing them to be as competitive as other conventional-energy generators," she says.

PXIL chief operating officer Gyan Mohan says PXIL performed mock trades in preparation for the inaugural auction.

New market

A plan to develop an REC market was unveiled by India's Central Electricity Regulatory Commission in January 2010. RECs are designed to supplement - and in some cases replace - existing renewables policies, including tax breaks on wind-power plants, feed-in tariffs and minimum renewables mandates introduced by many Indian states. Projects registered for RECs are not eligible to receive feed-in tariffs. Market trading in non-solar RECs must keep within a price band of INR 1,500-3,900/MWh ($33-87/MWh).

Last year, India installed a record 2GW of new wind, becoming the world's third-largest market for new wind capacity after China and the US. This brought India's installed capacity to 13.1GW.

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