1

1010thth Capacity Building Program for Officers Capacity Building Program for Officers of Electricity Regulatory Commissionsof Electricity Regulatory Commissions

1313--19 June 201619 June 2016

Policy and Regulation for Policy and Regulation for Renewable Renewable Energy Certificates Energy Certificates

(RECs)(RECs)

Anoop SinghAnoop SinghAssociate Prof.Associate Prof.

Dept of Industrial and Management Dept of Industrial and Management EnggEngg..IIT KanpurIIT Kanpur

Sustainable Energy PathSustainable Energy Path

•• Domestic DriversDomestic DriversDomestic DriversDomestic Drivers–– Increasing energy demandIncreasing energy demand

–– Lack of fossil resources Lack of fossil resources

–– Increasing energy import (energy security)Increasing energy import (energy security)

–– Clean energy accessClean energy access

•• International DriversInternational Drivers–– Global warming & Kyoto Protocol…..Global warming & Kyoto Protocol…..

–– CompetitivenessCompetitiveness

2

Sustainable Energy Policy OptionsSustainable Energy Policy Options

•• Stimulate Green InvestmentStimulate Green InvestmentStimulate Green InvestmentStimulate Green Investment–– FiTFiT, RPO, REC, RPO, REC

•• Address Distortions in Energy PricingAddress Distortions in Energy Pricing–– Encourage energy conservationEncourage energy conservation

•• Address Environmental ExternalitiesAddress Environmental ExternalitiesChi h i h fl h SC h lChi h i h fl h SC h l–– Chimney height, fly ash use, SC technologyChimney height, fly ash use, SC technology

•• Enhance Energy EfficiencyEnhance Energy Efficiency–– Star Labeling, PAT SchemeStar Labeling, PAT Scheme

Renewable Energy Resources Renewable Energy Resources ––Technological ChallengesTechnological Challenges

•• Increasing PV efficiencyIncreasing PV efficiencyIncreasing PV efficiencyIncreasing PV efficiency

•• Cost effective power electronicsCost effective power electronics

•• Energy Storage Energy Storage –– Fuel CellsFuel Cells

•• High capacity offshore windHigh capacity offshore wind

•• Grid IntegrationGrid Integration•• Grid IntegrationGrid Integration

•• Generation ForecastingGeneration Forecasting

•• (New Business Models (New Business Models –– ReplicabilityReplicability, , Scalability Challenges)Scalability Challenges)

3

Role of TechnologyRole of Technology•• Resource Identification and MappingResource Identification and Mapping

–– New reserves for coal, oil, gasNew reserves for coal, oil, gas

–– Wind and solar mapping across countryWind and solar mapping across countryWind and solar mapping across countryWind and solar mapping across country

•• Resource Harnessing & ConversionResource Harnessing & Conversion–– Coal Mining, Coal Bed MethaneCoal Mining, Coal Bed Methane

–– Oil Oil –– Deep sea, Oil Shale; Natural GasDeep sea, Oil Shale; Natural Gas

–– Electricity Electricity -- Super Critical, Ultra Supercritical, IGCCSuper Critical, Ultra Supercritical, IGCC

•• Transmission/TransportationTransmission/Transportation–– Cross boundary trade in Natural Gas Cross boundary trade in Natural Gas –– Central Asia, Gulf, MyanmarCentral Asia, Gulf, Myanmar

•• DistributionDistribution–– Electricity Distribution Electricity Distribution -- HVDS and Smart GridHVDS and Smart Grid

–– Oil and natural gas pipelinesOil and natural gas pipelines

–– City gas distributionCity gas distribution

•• UseUse–– Appliance efficiencyAppliance efficiency

R bl E R iR bl E R iRenewable Energy Resources in Renewable Energy Resources in IndiaIndia

4

Wind Energy Map of India

Untapped Wind Potential!Untapped Wind Potential!

•• Hub HeightHub HeightHub HeightHub Height

•• OffOff--shareshare

•• Vertical AxisVertical Axis

•• LBNL Study projects India’sLBNL Study projects India’s onshoreonshore windwind•• LBNL Study projects India s LBNL Study projects India s onshoreonshore wind wind potential to be 2,006,000 MW (3,121,000 potential to be 2,006,000 MW (3,121,000 MW) at 80 m (120 m) hub height!!!MW) at 80 m (120 m) hub height!!!

5

So: Phadke et al. (2012), LBNL

Solar Solar Resources in Resources in I diI diIndiaIndia

6

All India Generation Capacity All India Generation Capacity (As on 31 Dec. 2013 )(As on 31 Dec. 2013 )

233.9250

Total Pvt. Sector 

l C l

39.7

76.145.4

67.0

138.2

100

150

200

neration Cap

acity (GW)

Total Central 

Total State 

TOTAL (ALL INDIA)

53.1

6.527.5

3.7

90.8

39.7

8.0

0.0

2.77.1

9.7 0.021.6

4.8

39.929.5

0

50

COAL   GAS & DIESEL

NUCLEAR   HYDRO   RES (MNRE) TOTAL  

Gen

So:CEA (2013)

Grid Interactive Renewable Energy Grid Interactive Renewable Energy Deployment (By Source)Deployment (By Source)

35000(as on 31.12.2012)(as on 31 12 2013)

18420

26677

50

29989

15000

20000

25000

30000

Capacity (M

W)

(as on 31.12.2013)

(So: MNRE)(So: MNRE)

3496

1249

2240

96

1176

2015

3763

1285

2513

99

2180

0

5000

10000

Wind SHP Biomass Bagasse Cogen

Waste to Power

Solar Total

7

Role of Policy and RegulationRole of Policy and Regulation

Low Carbon Growth Low Carbon Growth -- Policy Policy Developments in IndiaDevelopments in India•• Renewable EnergyRenewable Energy

El i i A 2003El i i A 2003 RPORPO–– Electricity Act 2003 Electricity Act 2003 –– RPORPO–– Renewable Energy Certificates (REC)Renewable Energy Certificates (REC)

•• Energy EfficiencyEnergy Efficiency–– Energy Efficiency StandardsEnergy Efficiency Standards–– Appliance RatingAppliance Rating–– CEA Notification on Use of Super Critical CEA Notification on Use of Super Critical

TechnologyTechnology–– PAT under NMEEEPAT under NMEEE

•• National Action Plan for Climate ChangeNational Action Plan for Climate Change–– JN National Solar MissionJN National Solar Mission

8

How to make RE story a success?How to make RE story a success?

•• We have technology butWe have technology butWe have technology, but We have technology, but –– Conventional resources are limited and Conventional resources are limited and

increasingly difficult to harness (land, increasingly difficult to harness (land, envenv. . clearances) clearances)

–– It is expensive (….costs are coming down)It is expensive (….costs are coming down)p ( g )p ( g )

–– It is difficult to get investors to put money It is difficult to get investors to put money into itinto it

Need some Carrots (and small sticks)Need some Carrots (and small sticks)

CarrotsCarrots

•• SubsidiesSubsidies

•• FeedFeed--in Tariff (in Tariff (FiTFiT))

•• Tax BreaksTax Breaks

Sticks!Sticks!Sticks!Sticks!

•• Obligation to buy electricity generated Obligation to buy electricity generated from renewable energy resources, from renewable energy resources, Renewable Portfolio ObligationRenewable Portfolio Obligation (RPO)(RPO)

9

Electricity Act 2003 and Policy Electricity Act 2003 and Policy Framework for Renewable EnergyFramework for Renewable Energy

•• State Electricity Regulatory Commissions (SERCs) State Electricity Regulatory Commissions (SERCs) to to specify a percentage of the total consumption of electricityspecify a percentage of the total consumption of electricityspecify a percentage of the total consumption of electricityspecify a percentage of the total consumption of electricityin the area of a distribution licensee, for purchase of in the area of a distribution licensee, for purchase of electricity from coelectricity from co--generation and renewable energy generation and renewable energy sources (renewable portfolio obligation) (Sec. 81 (1) (e)).sources (renewable portfolio obligation) (Sec. 81 (1) (e)).

•• SERCs to promote coSERCs to promote co--generation and generation of generation and generation of electricity through renewable sources of energy by electricity through renewable sources of energy by providing suitable measures forproviding suitable measures for connectivity with the gridconnectivity with the gridproviding suitable measures for providing suitable measures for connectivity with the grid connectivity with the grid and sale of electricity to any personsand sale of electricity to any persons (Sec. 81 (1) (e)).(Sec. 81 (1) (e)).

•• Terms and conditions for the Terms and conditions for the determination of tariffdetermination of tariff to be to be prescribed by the SERCs to promote coprescribed by the SERCs to promote co--generation and generation and generation of electricity from renewable sources of energy. generation of electricity from renewable sources of energy. (Sec. 61 (h))(Sec. 61 (h))

Electricity Act 2003 and Policy Framework Electricity Act 2003 and Policy Framework for Renewable Energy (Contd.)for Renewable Energy (Contd.)

•• National Electricity Policy to be formulated by the National Electricity Policy to be formulated by the central government, in consultation with the statecentral government, in consultation with the statecentral government, in consultation with the state central government, in consultation with the state governments for development of the power system governments for development of the power system based on based on optimal utilization of resources including optimal utilization of resources including renewable sources of energyrenewable sources of energy. (Sec. 3 (1)). (Sec. 3 (1))

•• Central Government to prepare a national policy, in Central Government to prepare a national policy, in l i i h h S Gl i i h h S Gconsultation with the State Governments, consultation with the State Governments,

permitting stand alone systemspermitting stand alone systems (including those (including those based on renewable sources of energy and other based on renewable sources of energy and other nonnon--conventional sources of energy) for rural areas. conventional sources of energy) for rural areas. (Sec. 4) (Sec. 4)

10

Renewable Portfolio Obligation (09Renewable Portfolio Obligation (09--10)10)percentage of total procurement of the Distribution Licenseepercentage of total procurement of the Distribution Licensee

Mah. Orissa M.P. Gujarat Kar. Rajasthan TN U.P. A.P.

RPO 6 4 0.5 2(08-09)

Min.5Max.10

Wind $3.6

Bio-mass1.43

10 7.5 5(07-08)

Wind0.5

Solar &Oth.

Upto 75

FeedFeed--in Tariff: absence of economic efficiency?in Tariff: absence of economic efficiency?

Maharashtra M.P. Gujarat Kar. Rajasthan TN U.P. AndhraPradesh

Tariff(Rs. /

Wind – Pre99

3.97 (1)3.80 (2)

3.37(New

3.4 Wind –projects

Wind–

Cogen.2.86-3.38

Wind &MSW(

kWh) 2.25 to 4.01(94-95 to2013-14)

Wind – 99 to032.80 to 3.9(over 8 yr.)

Wi d N

( )3.63 (3)3.46 (4)3.3 (5-20)

(WindMills)

Existingas perthe PPA

InfirmInj. atUI t

p jCommd.after 23Feb. 20063.25 + 0.06for 10 yrs;3.79 from11-20 yr.

OtherR bl

2.75,2.90

BiomassandBagassebasedC

for 2006-10based on yr.of com.

Mini/MicroHydel 3.39-1.90 for 1st-20th year.

Oth 2 5

- 3.37 + 5 paBase price ason 1 April2004.

Incentive ofPaise 21.5 /kWh for PLFexceeding 55(bWind – New

3.50 in 1styear; + 0.15for 13 years

Non-fossilfuel basedCogen. –3.05 + 2 pa

UI rateof thestate

RenewableFor CoD04-053.32 + 2up to 2013-14

Cogen. - 3.15

Others 2.5

In-firm 1.42(+ 4 pa)Incentivefor PLF.

(bag.basedcogen),80(biomass), 35mini-hydel

11

Grid Interactive RE Grid Interactive RE (as on 31.07.2014)(as on 31.07.2014)

Any Anomalies?Any Anomalies?

12

RPO and its Compliance Across RPO and its Compliance Across States (in %)States (in %)

States

RPO Targets RPO Performance

2007-082008-

092009-

10 2010-11 2011-12 2007-08 2008-092009-

10A dhAndhraPradesh#$ 5 5 5 5 5 4.41 3.95 4.06Bihar@ 4 5 6 NADelhi 1 1 1 1 --- --- ---Gujarat 1 2 2 2.07 NA 2.55Haryana 3 5 10 10 10 NA 0.01 5.7

Karnataka 7-10 7-10 7-10 9.83 10.80 11.04Madhya Prad. 10 10 10 10 0.08 0.07 0.06Maharashtra$ 4 5 6 3 35 3 36 4 25Maharashtra$ 4 5 6 3.35 3.36 4.25Orissa 3 3 4 0 0 1.26Punjab 1 1 2 3 4 0.69 0.74 1.49Rajasthan$ 4.88 6.25 7.45 8.50 9.75 2.57 4.90 3.23Tamil Nadu 10 10 11.65 12.08 13.79Uttaranchal 5 5 8 9 10 1.4 1.7 2.18Uttar Pradesh 7.5 7.5 7.5 1.26 2.98 2.97

West Bengal 0.95-3.8 2-4.8 4-6.8 7-8.3 10 NA 0-0.37 0-0.34

Discontinuity in prices in the demand Discontinuity in prices in the demand functionfunction

Feed-in-Tariff and Shortfall in RPO Compliance

13

Uttarakhand

ArunachalPradesh

Sikkim

Haryana

HimachalPradesh

Punjab

Delhi

Chandigarh

Jammuand

Kashmir

10.39 17.70

9.18

9.63

Bayof

Bengal

Maharashtra

Andhra

Pradesh

Odisha

Madhya PradeshWestBengal

Bihar

Jharkhand

Uttar Pradesh AssamNagaland

Manipur

MizoramTripura

Meghalaya

Rajasthan

Gujarat

Daman and DiuDadra and

Nagar Haveli

10.90

10.37

11.1617.80

10.44 (Capacity > 2MW)10.70 (Capacity up to

2MW)

15.00

10.00

ArabianSea

g

Indian Ocean

Tamil NaduLakshadweep

Goa

Puducherry

Andamanand

NicobarIslands

17.91

18.45

14.50

15.18

STATE-WISE FEED-IN-TARIFF FOR SOLAR PV

Wind Energy Tariff Across States Wind Energy Tariff Across States (2008(2008--09)09)

4.3Av. Tariff for Wind Energy

37)

4) esh (3

.97)

3.5)

.65)

gal (4)

4.08)3.3

3.5

3.7

3.9

4.1

(Rs. / kWh)  

Andhra Prad. (3.3

Gujarat (3.37)

Karnataka (3.4

Kerala (3

.14)

Mad

hya Prade

Mah

arsthra (3

Rajasthan

 (3.

TN (2

.9) West Beng

Haryana (4

2.5

2.7

2.9

3.1

1 2 3 4 5 6 7 8 9 10

(

14

ChallengesChallenges

•• Economic Efficiency of existing policiesEconomic Efficiency of existing policiesEconomic Efficiency of existing policies Economic Efficiency of existing policies

•• States have different resource endowments and States have different resource endowments and some have very limited ones (e.g. Delhi, some have very limited ones (e.g. Delhi, Chandigarh)Chandigarh)

•• How to How to incentiviseincentivise renewable resources in renewable resources in remote areas not connected with grid?remote areas not connected with grid?

100 kW Solar PV plan in 100 kW Solar PV plan in TangtseTangtse, , LadakhLadakh

15

A solution?A solution?

What differentiates electricity from What differentiates electricity from renewable energy sources?renewable energy sources?

•• Electricity from Renewable Electricity from Renewable energy Sourcesenergy Sources

•• Electricity Electricity from from Conventional Conventional energy Sourcesenergy Sources

energy Sourcesenergy Sources

16

What is Renewable Energy What is Renewable Energy Certificates?Certificates?

== ++‘Green electricity’‘Green electricity’ ‘electricity‘electricity ‘green ‘green

•• Sell ‘electricity’ and ‘green certificates’ in Sell ‘electricity’ and ‘green certificates’ in different marketsdifferent markets

certificates’certificates’

A Market A Market for Nationally for Nationally Tradable Tradable Renewable Energy Credits/CertificatesRenewable Energy Credits/Certificates

•• Renewable portfolio standard with cost basedRenewable portfolio standard with cost basedRenewable portfolio standard with cost based Renewable portfolio standard with cost based feedfeed--inin--tariffs disregard economic efficiencytariffs disregard economic efficiency

•• One of the market related approach would be to One of the market related approach would be to unbundleunbundle ‘Greenness’ from ‘electricity’.‘Greenness’ from ‘electricity’.

•• Nationally Nationally tradable renewable energy tradable renewable energy certificatescertificates which could be sold separately fromwhich could be sold separately fromcertificatescertificates, which could be sold separately from , which could be sold separately from ‘electricity’ addresses these issues effectively.‘electricity’ addresses these issues effectively.

•• Separation of market for ‘energy’ and Separation of market for ‘energy’ and ‘renewable certificates’ promises a economic ‘renewable certificates’ promises a economic efficiency with proper implementation.efficiency with proper implementation.

17

A Market for Nationally Tradable A Market for Nationally Tradable Renewable Energy Certificates (Contd.)Renewable Energy Certificates (Contd.)

•• Lower cost of compliance for renewableLower cost of compliance for renewableLower cost of compliance for renewable Lower cost of compliance for renewable obligation. obligation.

•• Bring new investment as investors have access Bring new investment as investors have access to a ‘national’ market as opposed to a to a ‘national’ market as opposed to a particular state.particular state.

Advantages of Renewable Energy Advantages of Renewable Energy Certificates/Credits (RECs)Certificates/Credits (RECs)

•• Assist in RPO Compliance (Compliance market)Assist in RPO Compliance (Compliance market)A i t ti f RE (V l t k t)A i t ti f RE (V l t k t)•• Assist promotion of RE (Voluntary market)Assist promotion of RE (Voluntary market)

•• Marketing ‘Green/Greener’ Electricity to ConsumersMarketing ‘Green/Greener’ Electricity to Consumers•• Promote efficiency in investment and assist choice of Promote efficiency in investment and assist choice of

appropriate technologyappropriate technology•• Provide incentives for cost reduction and benchmarks for Provide incentives for cost reduction and benchmarks for

innovation in RE applicationsinnovation in RE applicationsinnovation in RE applicationsinnovation in RE applications•• Avoiding transmission of electricity generated through Avoiding transmission of electricity generated through

RE sourcesRE sources•• Assist efficient implementation of promotional policies by Assist efficient implementation of promotional policies by

the government. (esp. offthe government. (esp. off--grid RE based rural grid RE based rural electrification)electrification)

18

Revenue Stream for InvestorsRevenue Stream for Investors

CERC (Terms and Conditions for recognition andCERC (Terms and Conditions for recognition andCERC (Terms and Conditions for recognition and CERC (Terms and Conditions for recognition and issuance of Renewable Energy Certificate for issuance of Renewable Energy Certificate for Renewable Energy Generation) Regulations, 2010.Renewable Energy Generation) Regulations, 2010.

•• (a) Revenue from sale of ‘green electricity’ to (a) Revenue from sale of ‘green electricity’ to DiscomsDiscoms under a feedunder a feed--inin--tariff specified by the tariff specified by the SERCs.SERCs.

•• (b) Sale of ‘Electricity’ to (b) Sale of ‘Electricity’ to DiscomDiscom at APPC Avg. at APPC Avg. Pooled Purchase Cost + Sale of RECs at PXs.Pooled Purchase Cost + Sale of RECs at PXs.

•• (c) RE based captive consumption, if above RPO can (c) RE based captive consumption, if above RPO can be sold as be sold as RECs.RECs.

Renewable Energy Credits/ Renewable Energy Credits/ Certificates (RECs)Certificates (RECs)

RECs are used for a variety of purposes includingRECs are used for a variety of purposes includingDi lDi l•• Disclosure, Disclosure,

•• Marketing and Marketing and •• Compliance monitoringCompliance monitoring•• These are also called as ‘green tags’ or Tradable Green These are also called as ‘green tags’ or Tradable Green

Certificates’ in Europe, Renewable Obligation Certificates’ in Europe, Renewable Obligation Certificates (RECs) in the UKCertificates (RECs) in the UKCertificates (RECs) in the UK.Certificates (RECs) in the UK.

•• Guarantee of Origin (GO) or Renewable Energy Guarantee of Origin (GO) or Renewable Energy Guarantee of Origin (REGO) is often used in the Guarantee of Origin (REGO) is often used in the European Union (EU) to certify that renewable European Union (EU) to certify that renewable electricity was generation in a particular jurisdiction. electricity was generation in a particular jurisdiction. This is primarily being used as a disclosure mechanism.This is primarily being used as a disclosure mechanism.

19

Market for RECs Market for RECs –– International International ExperienceExperience

•• REC schemes are under operation across variousREC schemes are under operation across variousREC schemes are under operation across various REC schemes are under operation across various countries including Italy, US, Australia, Belgium etc. countries including Italy, US, Australia, Belgium etc.

•• USA USA –– Arizona, Colorado, Connecticut, Maine, Arizona, Colorado, Connecticut, Maine, Maryland, Massachusetts, Nevada, New Jersey, New Maryland, Massachusetts, Nevada, New Jersey, New Mexico, New York, Pennsylvania, Rhode Island, Mexico, New York, Pennsylvania, Rhode Island, Texas, WisconsinTexas, Wisconsin

A Framework for Implementing Renewable A Framework for Implementing Renewable Energy Certificates in India Energy Certificates in India

Central Agency

State / Central

Compliance Auditors

CERC/ SERCs

REC Purchases

RPO Target

Certification Verification Tracking Defining RECs

Surrendered REC

Buyout Price

Individuals, CSR, NGOs,

REC as ‘green tt ib t ’

REC Purchases

‘Grey Electricity’

Generators under ‘REC’ Scheme

Power Exchange

National REC Database

Purchases g

RE Electricity (Feed-in-Tariff)

Compliance Market

attributes’

Voluntary Market

Non-renewable Generators

Electricity

‘Green Electricity’ Retail Products

So: Anoop Singh, “Economics, Regulation and Implementation Strategy for Renewable

Energy Certificates in India”, India Infrastructure Report 2010, OUP.

20

Issues in Implementing RECsIssues in Implementing RECs

•• Defining RECsDefining RECsDefining RECsDefining RECs

•• Eligibility for RECEligibility for REC

•• Category of CertificatesCategory of Certificates

•• Voluntary MarketsVoluntary Markets

•• BankingBanking

•• ‘Buyouts’‘Buyouts’

•• Central Electricity Regulatory Commission (Terms Central Electricity Regulatory Commission (Terms and Conditions for recognition and issuance of and Conditions for recognition and issuance of Renewable Energy Certificate for Renewable Energy Renewable Energy Certificate for Renewable Energy Generation) Regulations, 2010.Generation) Regulations, 2010.

CERC’s Framework for RECsCERC’s Framework for RECs

21

Mechanism for RECsMechanism for RECsEligible SourcesEligible Sources•• ‘Grid Connected’ small hydro, wind, solar including its integration ‘Grid Connected’ small hydro, wind, solar including its integration

with combined cycle, biomass, biowith combined cycle, biomass, bio--fuel cogeneration, urban or fuel cogeneration, urban or i i l & h i d b MNREi i l & h i d b MNREmunicipal waste & such sources as recognized by MNREmunicipal waste & such sources as recognized by MNRE

•• Two Categories of Certificates Two Categories of Certificates -- Solar and NonSolar and Non--SolarSolar

Eligible EntitiesEligible Entities•• Grid Connected RE Power Projects having no PPA at preferential Grid Connected RE Power Projects having no PPA at preferential

tariff with state utilities and having accreditation from a State tariff with state utilities and having accreditation from a State AgencyAgencyAgencyAgency

•• Shall sell electricity at Pooled cost of Power Purchase to Shall sell electricity at Pooled cost of Power Purchase to distribution utility or at mutually agreed price to any other licenseedistribution utility or at mutually agreed price to any other licensee

Obligated EntitiesObligated Entities•• As identified by the SERCs As identified by the SERCs -- distribution utilities, OA Users, distribution utilities, OA Users,

Captive ConsumersCaptive Consumers

Mechanism for RECs (Contd.)Mechanism for RECs (Contd.)

Issuing AuthorityIssuing Authority•• National Load National Load DespatchDespatch Center shall issue REC to Center shall issue REC to

Generator based on the Energy Injection Report Generator based on the Energy Injection Report prepared by SLDCprepared by SLDC

Trading of RECTrading of REC

•• Transaction of REC shall take place at Power Transaction of REC shall take place at Power ppExchanges operating under the guidance of CERCExchanges operating under the guidance of CERC

DenominationDenomination•• One REC is equivalent to 1 One REC is equivalent to 1 MWhMWh of renewable of renewable

energy generated and injected into the Grid.energy generated and injected into the Grid.

22

Mechanism for RECs (Contd.)Mechanism for RECs (Contd.)

•• REC shall be issued electronically to the GeneratorREC shall be issued electronically to the GeneratorREC shall be issued electronically to the GeneratorREC shall be issued electronically to the Generator

•• Floor and Forbearance Price determined by the Floor and Forbearance Price determined by the CERC from time to timeCERC from time to time

•• Obligated entities with shortfall in RPO can buy REC Obligated entities with shortfall in RPO can buy REC from PXs Exchange Platform and redeem it for RPO from PXs Exchange Platform and redeem it for RPO compliance.compliance.compliance. compliance.

•• RE Generator can apply for issuance of certificate RE Generator can apply for issuance of certificate uptoupto 3 months of energy injection in the grid3 months of energy injection in the grid

•• REC are valid for 1 year from the date of issuance.REC are valid for 1 year from the date of issuance.

23

Framework for REC Framework for REC ImplementationImplementation

Open Access Users

Power Exchange

1

RE Generators

1

Electricity to Grid Electricity From Grid

RPS  Obligated Entities 

Open Access Users

Power Exchange

1

RE Generators

1

Electricity to Grid Electricity From Grid

RPS  Obligated Entities 

DISCOMS

Captive Generators 

Other Obligated Entities

1

5

REC Purchase Agreement/Trading

3A

Energy Accounting

Issuance of REC

Application to issue REC

2

4 Redemption of RECs

SLDC

6

Central Agency

SERC

DISCOMS

Captive Generators 

Other Obligated Entities

1

5

REC Purchase Agreement/Trading

3A

Energy Accounting

Issuance of REC

Application to issue REC

2

4 Redemption of RECs

SLDC

6

Central Agency

SERCSERC

Confirmation of EA

State Agency

Compliance Monitoring

3B

AuditorsRE Generator Registration

7RPO Compliance 

Reporting

State Agency

7

Confirmation of EA

State Agency

Compliance Monitoring

3B

AuditorsAuditorsRE Generator Registration

7RPO Compliance 

Reporting

State Agency

7

16000000

18000000

4000000

6000000

8000000

10000000

12000000

14000000

16000000

Month, Year Non Solar

Month, Year Solar

0

2000000

4000000

March, 2011

May, 2011

July, 2011

September, 2011

November, 2011

January, 2012

March, 2012

May, 2012

July, 2012

September, 2012

November, 2012

January, 2013

March, 2013

May, 2013

July, 2013

September, 2013

November, 2013

January, 2014

March, 2014

May, 2014

July, 2014

September, 2014

November, 2014

January, 2015

March, 2015

May, 2015

July, 2015

September, 2015

November, 2015

24

Solar RECsSolar RECs

3000000

3500000

Opening Balance

500000

1000000

1500000

2000000

2500000

RECs Issued

RECs Redeemed through Power Exchanges

RECs retained by RE Generators

Closing Balance

0

500000

March, 2011

May, 2011

July, 2011

September, 2011

November, 2011

January, 2012

March, 2012

May, 2012

July, 2012

September, 2012

November, 2012

January, 2013

March, 2013

May, 2013

July, 2013

September, 2013

November, 2013

January, 2014

March, 2014

May, 2014

July, 2014

September, 2014

November, 2014

January, 2015

March, 2015

May, 2015

July, 2015

September, 2015

November, 2015

NonNon--Solar RECsSolar RECs

14000000

16000000Opening Balance

RECs Issued

2000000

4000000

6000000

8000000

10000000

12000000 RECs Redeemed through Power Exchanges

RECs retained by RE Generators

Closing Balance

0

March, 2011

May, 2011

July, 2011

September, 2011

November, 2011

January, 2012

March, 2012

May, 2012

July, 2012

September, 2012

November, 2012

January, 2013

March, 2013

May, 2013

July, 2013

September, 2013

November, 2013

January, 2014

March, 2014

May, 2014

July, 2014

September, 2014

November, 2014

January, 2015

March, 2015

May, 2015

July, 2015

September, 2015

November, 2015

25

CERC’s Framework for Introducing CERC’s Framework for Introducing RECs in IndiaRECs in India

•• Separate RECs for solar and nonSeparate RECs for solar and non--solar RES.solar RES.pp

•• RE generators have two options RE generators have two options –– either to sell the renewable either to sell the renewable energy at preferential tariff (feedenergy at preferential tariff (feed--inin--tariff) fixed by the tariff) fixed by the concerned Electricity Regulatory Commission or to sell the concerned Electricity Regulatory Commission or to sell the electricity generation and RECs separately.electricity generation and RECs separately.

•• On choosing the second option, the environmental attributes On choosing the second option, the environmental attributes can be exchanged in the form of REC, one REC beingcan be exchanged in the form of REC, one REC beingcan be exchanged in the form of REC, one REC being can be exchanged in the form of REC, one REC being equivalent of 1h of electricity generated from RES. equivalent of 1h of electricity generated from RES.

•• ‘Electricity’ to be sold to distribution company at weighted ‘Electricity’ to be sold to distribution company at weighted average power purchase cost including shortaverage power purchase cost including short--term power term power purchase but excluding renewable power purchase cost.purchase but excluding renewable power purchase cost.

CERC’s Framework for Introducing CERC’s Framework for Introducing RECs in India (Contd.)RECs in India (Contd.)•• The REC can be traded only in the Power Exchanges The REC can be traded only in the Power Exchanges

approved by CERC within the band of a floor price approved by CERC within the band of a floor price and a forbearance (ceiling) price to be determined by and a forbearance (ceiling) price to be determined by CERC from time to time.CERC from time to time.

•• The distribution companies, Open Access consumer, The distribution companies, Open Access consumer, Captive Power Plants (CPPs) will have option of Captive Power Plants (CPPs) will have option of

h i h REC h i R blh i h REC h i R blpurchasing the REC to meet their Renewable purchasing the REC to meet their Renewable Purchase Obligations (RPO). Purchase Obligations (RPO).

•• Central level agency for registration of RE generators Central level agency for registration of RE generators participating in the scheme and for the issue of RECs participating in the scheme and for the issue of RECs to RE generators.to RE generators.

26

Advantages of Tradable Renewable Advantages of Tradable Renewable Energy Certificates/Credits (RECs)Energy Certificates/Credits (RECs)

•• Provide flexibility in meeting RPO of Provide flexibility in meeting RPO of discomsdiscoms/SEBs /SEBs y gy g((Compliance marketCompliance market))

•• Expand participation in promotion of RE (Expand participation in promotion of RE (Voluntary marketVoluntary market))

•• Promote efficiency in investmentPromote efficiency in investment

•• Assist choice of appropriate technologyAssist choice of appropriate technology

•• Provide incentives for cost reductionProvide incentives for cost reduction

•• Provide benchmarks for innovation in RE applicationsProvide benchmarks for innovation in RE applications

•• Avoid transmission of electricity generated through RE sourcesAvoid transmission of electricity generated through RE sources

•• Assist efficient implementation of promotional policies by the Assist efficient implementation of promotional policies by the government. (esp. offgovernment. (esp. off--grid RE based rural electrification)grid RE based rural electrification)

A Market for Nationally Tradable A Market for Nationally Tradable Renewable Energy Credits/CertificatesRenewable Energy Credits/Certificates

•• Renewable portfolio standard with cost basedRenewable portfolio standard with cost basedRenewable portfolio standard with cost based Renewable portfolio standard with cost based feedfeed--inin--tariffs disregard economic efficiencytariffs disregard economic efficiency

•• One of the market related approach would be One of the market related approach would be to to unbundleunbundle ‘Greenness’ from ‘electricity’.‘Greenness’ from ‘electricity’.

•• Nationally Nationally tradable renewable energy creditstradable renewable energy credits, , which could be sold separately fromwhich could be sold separately fromwhich could be sold separately from which could be sold separately from ‘electricity’ addresses these issues effectively.‘electricity’ addresses these issues effectively.

•• Separation of ‘energy’ and ‘renewable credit’ Separation of ‘energy’ and ‘renewable credit’ market promises a high degree of economic market promises a high degree of economic efficiency efficiency

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A Market for Nationally Tradable A Market for Nationally Tradable Renewable Energy Credits (Contd.)Renewable Energy Credits (Contd.)

•• Cost of compliance for renewable obligationCost of compliance for renewable obligationCost of compliance for renewable obligation Cost of compliance for renewable obligation can be reduced through adoption of nationally can be reduced through adoption of nationally tradable renewable energy credits. tradable renewable energy credits.

•• This would also be instrumental in promoting This would also be instrumental in promoting investment in the renewable energy in the investment in the renewable energy in the country. country.

Renewable Energy Certificates/Renewable Energy Certificates/Credits (RECs)Credits (RECs)

•• AttributesAttributes–– DenominationDenomination

–– EligibilityEligibility

•• Market Market –– PricingPricing

–– LiquidityLiquidity

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Eligibility for RECsEligibility for RECs

•• No PPA for sale of the power from the plant a feedNo PPA for sale of the power from the plant a feed--inin--iff d i d b hiff d i d b htariff determined by the SERCs.tariff determined by the SERCs.

•• It is gridIt is grid--connected (offconnected (off--grid excluded!)grid excluded!)

•• It sells power to the local distribution licensee at cost not It sells power to the local distribution licensee at cost not exceeding ‘pooled cost of power purchase’, or to other exceeding ‘pooled cost of power purchase’, or to other licensees or open access customer at mutually agreed licensees or open access customer at mutually agreed price or through power exchange at market determinedprice or through power exchange at market determinedprice or through power exchange at market determined price or through power exchange at market determined price.price.

•• The weighted average pooled price of longThe weighted average pooled price of long--term and term and shortshort--term power procurement of the distribution licensee term power procurement of the distribution licensee in the previous year excluding those based on renewable in the previous year excluding those based on renewable energy sources.energy sources.

Status of REC MarketStatus of REC Market

29

So: IEX

NonNon--solar REC Marketsolar REC Market

30

Solar REC MarketSolar REC Market

Missing RPO ComplianceMissing RPO Compliance

31

Suggestions for future Development of Suggestions for future Development of REC MarketREC Market•• FungibilityFungibility of RECs & of RECs & RECxRECx multipliermultiplier•• RPO Compliance needed for marketRPO Compliance needed for market•• RPO Compliance needed for market RPO Compliance needed for market

confidenceconfidence•• Need to link Need to link FiTFiT and REC mechanisms and REC mechanisms

(Participation of (Participation of disocmsdisocms under under FiTFiT regime).regime).•• ‘Buy out policies’ (penalty for RPO shortfall) ‘Buy out policies’ (penalty for RPO shortfall)

... and ... and mutualisationmutualisation..•• Linking PAT and REC mechanism Linking PAT and REC mechanism •• Voluntary MarketVoluntary Market•• Banking (and Roll over?)Banking (and Roll over?)•• StandStand--alone systemsalone systems

Thank YouThank You

www.iitk.ac.in/ime/anoopswww.iitk.ac.in/ime/anoops

anoops@iitk.ac.inanoops@iitk.ac.in

32

Further ReadingsFurther Readings

•• “Economics, Regulation and Implementation Strategy“Economics, Regulation and Implementation StrategyEconomics, Regulation and Implementation Strategy Economics, Regulation and Implementation Strategy for Renewable Energy Certificates in India”, India for Renewable Energy Certificates in India”, India Infrastructure Report 2010, OUP.Infrastructure Report 2010, OUP.

•• “A Market for Renewable Energy Credits in the “A Market for Renewable Energy Credits in the Indian Power Sector”, Indian Power Sector”, Renewable and Sustainable Renewable and Sustainable Energy Review Energy Review journaljournal, , Elsevier, 13 (2009) 643Elsevier, 13 (2009) 643––652.652.gygy jj ( )( )

•• “Nationally Tradable Renewable Energy Credits for “Nationally Tradable Renewable Energy Credits for Renewable Portfolio Obligation in the Indian Power Renewable Portfolio Obligation in the Indian Power Sector”, SEE Conference Proceedings, Bangkok., 21Sector”, SEE Conference Proceedings, Bangkok., 21--23 Nov.2006.23 Nov.2006.

Selected Readings Selected Readings (some accessible (some accessible from from www.iitk.ac.in/ime/anoopswww.iitk.ac.in/ime/anoops))

•• “Towards a Competitive Market for Electricity and Consumer Choice in Indian “Towards a Competitive Market for Electricity and Consumer Choice in Indian Power Sector”, Energy Policy Vol. 38 4196Power Sector”, Energy Policy Vol. 38 4196--4208, 2010. (Elsevier)4208, 2010. (Elsevier)

•• “A Market for Renewable Energy Credits in the Indian Power Sector”, Renewable “A Market for Renewable Energy Credits in the Indian Power Sector”, Renewable d S t i bl E R i j l El i 2009d S t i bl E R i j l El i 2009and Sustainable Energy Review journal, Elsevier, 2009.and Sustainable Energy Review journal, Elsevier, 2009.

•• “Economics, Regulation and Implementation Strategy for Renewable Energy “Economics, Regulation and Implementation Strategy for Renewable Energy Certificates in India” in India Infrastructure Report 2010, Oxford Univ. Press.Certificates in India” in India Infrastructure Report 2010, Oxford Univ. Press.

•• ““AnalysingAnalysing Efficiency of Electric Distribution Utilities in India: a Data Efficiency of Electric Distribution Utilities in India: a Data Envelopment Analysis” (with Envelopment Analysis” (with DilipDilip Kumar Kumar PandeyPandey), IAEE International ), IAEE International Conference, Stockholm 19Conference, Stockholm 19--23 June, 2011.23 June, 2011.

•• ““ModellingModelling Economic Efficiency of Renewable Energy Policies: A MultiEconomic Efficiency of Renewable Energy Policies: A Multi--State State M d l F I di ” A d f W ld R bl E C 17M d l F I di ” A d f W ld R bl E C 17 19 O19 OModel For India”, Accepted for World Renewable Energy Congress, 17Model For India”, Accepted for World Renewable Energy Congress, 17--19 Oct. 19 Oct. 2011, Bali, Indonesia. (with 2011, Bali, Indonesia. (with SundeepSundeep ChowdaryChowdary).).

•• “Economics of Iran“Economics of Iran--PakistanPakistan--India Natural Gas Pipeline: Implications for Energy India Natural Gas Pipeline: Implications for Energy Security in India”, Economic & Political Weekly, V. XLIII, No. 7 2008.Security in India”, Economic & Political Weekly, V. XLIII, No. 7 2008.

•• “Power Sector Reform in India: Current Issues and Prospects”, Energy Policy, “Power Sector Reform in India: Current Issues and Prospects”, Energy Policy, Elsevier, Volume 34, Issue 16, November 2006.Elsevier, Volume 34, Issue 16, November 2006.

33

•• “Estimating the Impact of Restructuring on Electricity Generation Efficiency: “Estimating the Impact of Restructuring on Electricity Generation Efficiency: The Case of the Indian Thermal Power Sector”, NBER Working Paper 17383, The Case of the Indian Thermal Power Sector”, NBER Working Paper 17383, 2011 ( ith M L C Al d2011 ( ith M L C Al d LiLi dd K biK bi M likM lik))

Selected Readings (Contd.)Selected Readings (Contd.)

2011 (with Maureen L. Cropper, Alexander 2011 (with Maureen L. Cropper, Alexander LimonovLimonov and and KabirKabir MalikMalik))

•• ““AnalysingAnalysing Efficiency of Electric Distribution Utilities in India: a Data Efficiency of Electric Distribution Utilities in India: a Data Envelopment Analysis” (with Envelopment Analysis” (with DilipDilip Kumar Kumar PandeyPandey), IAEE International ), IAEE International Conference, Stockholm 19Conference, Stockholm 19--23 June, 2011.23 June, 2011.

•• “Directions for Effective Regulation for Renewable Energy: An Analysis of “Directions for Effective Regulation for Renewable Energy: An Analysis of Renewable Energy Certificates”, India Energy Security Summit: Energy Renewable Energy Certificates”, India Energy Security Summit: Energy Security for a sustainable future, 3Security for a sustainable future, 3--4 March 2011, New Delhi, IPPAI.4 March 2011, New Delhi, IPPAI.

“A C i l A i d l f l i i d C“A C i l A i d l f l i i d C•• “At a Crucial Juncture: A perspective on development of electricity and REC “At a Crucial Juncture: A perspective on development of electricity and REC markets in India”, 3 years of Indian Energy Exchange: Vision and Views of markets in India”, 3 years of Indian Energy Exchange: Vision and Views of Industry Leaders, 2011, Industry Leaders, 2011, PowerlinePowerline / IEX, New Delhi./ IEX, New Delhi.

•• “Economics, Regulation and Implementation Strategy for Renewable Energy “Economics, Regulation and Implementation Strategy for Renewable Energy Certificates in India” in Certificates in India” in India Infrastructure Report 2010India Infrastructure Report 2010, Oxford Univ. Press., Oxford Univ. Press.

•• “A Policy for Improving Efficiency of Agriculture Pump sets in India: “A Policy for Improving Efficiency of Agriculture Pump sets in India:

Selected Readings (Contd.)Selected Readings (Contd.)

Drivers, Barriers and Indicators”, Climate Strategies, UK, Working Paper Drivers, Barriers and Indicators”, Climate Strategies, UK, Working Paper 20092009

•• “Climate Co“Climate Co--benefit Policies for the Indian Energy Sector: Domestic benefit Policies for the Indian Energy Sector: Domestic Drivers and NorthDrivers and North--South Cooperation”, South Cooperation”, Climate PolicyClimate Policy 9 (5) 5299 (5) 529--543 2009543 2009

•• “Informal Markets for Electricity: Economics of lighting for Hawkers in “Informal Markets for Electricity: Economics of lighting for Hawkers in India”, India”, International Journal of Energy Sector Management: Special Issue International Journal of Energy Sector Management: Special Issue on India, 3(3), 308on India, 3(3), 308--323, 323, 2009.2009.

•• “A Market for Renewable Energy Credits in the Indian Power Sector”, “A Market for Renewable Energy Credits in the Indian Power Sector”, Renewable and Sustainable Energy Review, Renewable and Sustainable Energy Review, Elsevier, 2009.Elsevier, 2009.

•• “Rural Electrification in India: Economic and Institutional aspects of “Rural Electrification in India: Economic and Institutional aspects of RenewablesRenewables”, with James ”, with James CustCust and and KarstenKarsten NeuhoffNeuhoff, EPRG WP 0730, , EPRG WP 0730, University of Cambridge, UK., 2007University of Cambridge, UK., 2007