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SUSTAINABILITY OF RENEWABLE ENERGY: AN ANALYSIS OF INDIA’S RENEWABLE ENERGY CERTIFICATES REGIME.
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SUSTAINABILITY OF RENEWABLE ENERGY:
AN ANALYSIS OF INDIA’S RENEWABLE ENERGY CERTIFICATES REGIME.
AUTHORED BY - KAPULURU SAIVARUN
In
the recent decade ‘climate change’ and ‘sustainability’ are the buzz words and
yes looking at the alarming rate of greenhouse gas emissions and rise in global
temperatures due to burning of fossil fuels and it is high time that the world
should move towards renewable energy. Use of energy is inevitable thus it is
important to choose wisely whether it is renewable or otherwise. India being a developing country is heavily
dependent on fossil fuels for producing the electricity as it is the viable
source of producing electricity than producing it through renewable sources as
it need huge investments. However, India is putting its complete efforts
towards energy transition in achieving sustainability. As a part of the
promoting renewable energy, the Renewable Energy Certificates (RECs) was
introduced through the policies framed under the Electricity Act, 2003 along
with National Action Plan on Climate Change (NAPCC). Once the electricity flows
into the powergrid, electrons are not identifiable whether it is generated
using renewable or non-renewable resources. So, RECs are the market-based
instruments that allows the consumers to purchase these RECs to claim that
energy used by particular entity is from renewable source. This acts as an
accounting and tracking mechanism for green energies. This paper assesses
whether renewable energy certificate mechanism is actually sustainable in the
light of analysing effectiveness and efficiency of RECs in climate change.
Keywords:
India, Sustainability, Climate change, Renewable energy
Recent
years have seen a shift in India ‘s approach to negotiations within the United
Nations Framework convention on Climate Change (UNFCCC), as well as more
advanced climate policy actions are taken at national level. This trend towards
a multi-level governance regime, with a more independent sub-national
dimension, makes it important to study the factors that are driving and shaping
policy at each level.[1]
Further, Risks associated with climate change and concerns about environmental
sustainability have endangered the need to transition to low carbon energy
systems.
Since
the advent of the World Commission on Environment Development's study "Our
Common Future", the need for a sustainable world has been a common issue
among nations. The use of energy is a very important international concern,
since nearly all global environmental issues relate to the use of energy. Apart
from energy conservation and efficiency a shift to renewable sources is
inevitable for climate change, if we want to take the environment seriously.
The only way is a sustainable world using renewable energy sources if it is,
how can these sources be implemented in society?
Renewable
energy (RE) is considered to be one of the catalysts of ‘sustainable and
inclusive growth’ in India. Considering that India is rich in potential Renewable
energy sources, it could be a solution to India’s overdependence on fossil fuel
to eradicate energy poverty. The Government of India, through the Ministry of
New and Renewable Energy (MNRE), has implemented many initiatives to run a
large and wide range of programmes covering the entire range of new and
renewable energies in the country. There have been constant efforts by the
Government to increase penetration of renewable energy to increase more
conventional energy sources. Renewable sources like solar, wind, small hydro,
and biomass have been very useful in improving energy accessibility in the
rural areas across the country.
India
imports about 80% of its crude oil and the rising demand for energy may push
the oil import to an unsustainable level[2]. In
2013-14, India imported crude oil valued at $142.97 billion 41 times higher
compared to $3.5 billion in 1998-99. Similarly, import of liquefied natural gas
reached $9.23 billion in 2014-15 which is just over 26 times higher than $346.8
million in 2004-05.[3]
Greater dependency on oil and gas, could pose serious challenges to the
environment as burning of fossil fuels causes carbon emission and these green
house gases results in global warming and climate change India is blessed with
plenty of renewable resources like solar, wind, biomass and small hydro, an
estimated potential of 897GW has been identified from various renewable energy
sources in the country, which includes 749GW from solar, 103 from wind, 25GW
from bio-energy and 20GW from small hydropower.[4]
The
Indian renewable energy market is going through a transformation, which should
excite global investors, renewable equipment producers, bankers, renewable
energy technology developers and others interested in the renewable market in
Inda.
As a
part of the promoting renewable energy, the Renewable Energy Certificates
(RECs) was introduced through the policies framed under the Electricity Act,
2003[5]
along with National Action Plan on Climate Change (NAPCC).[6]
Once the electricity flows into the powergrid, electrons are not identifiable
whether it is generate using renewable or non-renewable resources. So, RECs are
the market-based instruments that allows the consumers to purchase these RECs
to claim that energy used by particular entity is from renewable source. This
acts as an accounting and tracking mechanism for green energies.
This
paper provides the India’s Renewable Energy Aspirations and Endeavours and
Renewable Energy Certificates: the legal and regulatory framework along with
comparative analysis of RECs model in other countries.
A
sustainable world and a sustainable development are recently reintroduced terms
in relation to the environmental situation in the world. Best known in this
context is perhaps the use of these concept in the report of the World
Commission on Environment and Development “Our Common Future” (UN, 1987).[7]
In accordance with the Paris
Agreement, India expressed its Intention Nationally Set Contribution
(INDC 2015), which was submitted to the UNFCC in October 2015, to reduce the
intensity of its GDP's greenhouse gas emissions by 33–55% from its 2005 level
by 2030. It also stated that by 2030, about 40% of the total installed
electricity capacity would be based on non-conventional sources. More recently,
India announced an ambitious target of 450 GW installed capacity of renewable energy
by 2030 to combat climate change at the United Nations Climate Action Summit in
September 2019 in New York. With 100 GW of solar, 60 GW of wind, 10 GW of
biomass, and 5 GW of small hydro, the cumulative installed capacity of
renewable energy in the country was established as an interim goal of 175 GW by
the year 2022.
Essentially,
as sustainable world means a world where everything which is taken from the
nature is to be restored in the same manner, which results in an earth where
future generations have same sources as the former generations.
Fundamentally,
in a sustainable world the use of certain form of energy should be at the same
rate at which its is getting produced and restored. So, only renewable energy
sources are such sources which are sustainable in nature like Solar, Wind,
Hydro, Bio-mass and Etc.
India
is also one such nation which is striving for making its working model sustainable
and carbon free. The ministry of New and Renewable Energy (MNRE) is one of the
ministries under the government of India which is responsible for development
of new and renewable energy requirements of the country. The two Oil shocks
during 1970s, the sudden increase of oil prices and adverse impact of balance of payments position led to the establishment
of commission for additional Sources of Energy in the Department of Science
& Technology. The Commission was responsible for formulating policies for
development of new and renewable energy and their implementation. In 1982,
Department of Non-conventional Energy Sources (DNES) and the then Ministry of
Energy was created. In 1992, DNES became the Ministry of Non-conventional
Energy Sources. In October 2006, the Ministry was re-structured as the Ministry
of New and Renewable Energy.[8]
The ministry’s mission is to ensure.
·
Energy security by
decreasing dependency on oil imports and developing alternate fuels like
bio-fuels and green hydrogen.
·
Increase the share of green
energy in the energy-mix
·
Energy availability and
access to all sectors of the society
·
Energy affordability through
providing cost effective and efficient energy supply
Solar
Since, ancient times Sunlight is considered as a source of
life to our planet. India being the 7th largest country in terms of
land area has a vast potential of solar energy around 5000 trillion kWh per
year energy which on average receiving upto 4-7 kWh per sq. m per day.[10] Solar is the most
secure source of energy of all others reason being its abundantly available. In
the recent years India is investing on solar energy for the social and economic
benefits like reduction in use of fuel wood, minimising the risks of
contracting lungs and eye ailments, employment at rural level.
National Institute of Solar Energy has evaluated the India
solar potential of approximately 748 GW and solar panels covering around 3% of
the waste land. In addition, the deserts offer great
potential for solar power generation in India. About 271GW of solar power
potential exists in the deserts of Ladakh (Jammu and Kashmir), Thar
(Rajasthan), and Kutch (Gujarat).[11]India’s target is to install 100 GW grid-connected solar
power plants and already 40.1 GW is installed. Recently, India stands 4th in
solar PV instalment across the globe as on end of 2021.[12] The objective of India is become world leader in solar power
by creating the policy ecosystem for solar technology distribution across the
country.
Wind
The India is 4th largest in wind energy sector in
world which is making steady progress. The country has a strong
ecosystem with a total installed capacity of
35.6 GW (as on 31 March 2019). Wind is a site-specific energy resource and
therefore, selection of potential sites requires a comprehensive wind resource
assessment. Through the National Institute of Wind Energy (NIWE), the
government has installed over 800 wind-monitoring stations across the country
at 50m, 80m and 100m above ground level and issued wind potential maps. Recent assessments show a wind energy potential of about 302 GW
at 100 m above ground level in India. Further, Government is
promoting wind power projects across the country through private sector
investment.[13]
Small-Hydro
Hydro power projects are categorised as large and small hydro
based on their production capacity. Different countries have different criteria
to categorize hydro power projects. In India, hydro power plants with capacity
up to 25 MW are categorised as small hydro. Prior to 1989 ministry of power
looked after Hydro Power. Subsequently, plant capacity up to 3MW was
transferred to the MNRE. Lately in 1999 plant capacity up to 25MW also was
entrusted with the MNRE.
Hydro and Renewable Energy Department (HRED) assessed that
the country has an estimated potential of 21133 MW from 7133 sites for power
generation in the country from small / mini hydel projects. India’s target is
to install 5 GW small hydro and 4.8 GW is already installed.[14]
Waste to Energy
With the advent of industrialisation and urbanisation
negative impacts are accompanied by the positive impacts. One such negative
impact is increase in waste quantity which poses threats to environment.
However, the technological advancement helps in safe disposal of waste and also
can convert such waste in the form of electricity and Biogas.
There are various processes through which waste can be
converted in to energy
i.
Biomethanation: is anaerobic
digestion of organic materials which is converted into biogas
ii.
Incineration: is
complete combustion of Municipal Solid Waste with the recovery of heat to
produce steam that in turn produces electricity through steam turbines.
iii.
Gasification: is a process
that decomposes materials at high temperature and low oxygen to produce
synthetic gas (a mixture of carbon monoxide (CO) and hydrogen (H2)). These
gases are used to produce electricity and act as a
iv.
Pyrolysis: Pyrolysis uses
heat to break down combustible materials in the presence of low oxygen
which produces a mixture of combustible gases; methane, complex
hydrocarbons, hydrogen, and carbon monoxide. These gases are used to produce
electricity through steam generators.
The total estimated potential of India’s urban and
industrial organic waste approximately can generate 5690
MW. India’s target is to install 0.5 GW “Waste to Energy” and 0.2 GW is
installed capacity.[15]
Bio Energy
Bio Energy is further divided into two types that is Biomass
and Biogas.
Biomass is a renewable and carbon-neutral source of energy,
32% of country total energy use is from biomass and 70% of the country’s
population rely on this source of energy for daily livelihood. The Biomass provides resources for grid power
generation. According to the study of MNRE India has the potential of 28 GW
from agricultural residues and 14 GW from bagasse produced by sugar mills.[16]
Biogas is a mixture of methane and carbon dioxide, produced
from organic materials which are bio-degradable through decomposition of this
materials in the presence of low oxygen. There are many programmes which was
implemented by MNRE for development of Biogas which also provides rural
employment. BPGTP scheme provides the decentralised energy source for
various activities from cooking to small power generation plant and this a very
reliable source.
Once
the electricity flows into the grid, electrons are not identifiable whether it
is generated using renewable or non-renewable resources. RECs are the market-based instruments that allows the consumers
or obligated entities to purchase these RECs to claim that energy used by
particular entity is from renewable source. This acts as an accounting and
tracking mechanism for green energies. As
a part of the promoting renewable energy, the Renewable Energy Certificates
(RECs) was introduced by the Central Electricity Regulatory Commission (CERC) through
the policies framed under the Electricity Act, 2003[17]
along with National Action Plan on Climate Change (NAPCC). The NAPCC provides flexibility in
achieving the purchase requirements through tradeable Renewable Energy Credits,
Certificates, or RECs in anticipation of potential difficulties for states in
meeting their obligatory RPOs.
Renewable
purchase obligation means, it a mandatory obligation created by the State
Electricity Regulatory Commissions (SERCs) under the Electricity Act, 2003[18], to
purchase minimum portion of renewable energy out of total energy consumption by
the obligated entity. RECs abridge the lack of availability of renewable energy
in different states of the country and requirement of the obligated entities to
meet the renewable purchase obligation (RPO).
The Act required the State Electricity
Regulatory Commissions (SERCs) to establish a minimum purchase requirement for
renewable energy and to use price regulations to encourage the grid
connectivity of electricity produced from renewable sources. In order to
achieve this, the 2006 National Tariff Policy mandated that distribution
companies purchase electricity based on renewable energy sources at
preferential feed-in tariffs (FIT) set by the SERCs. It also gave the SERCs
instructions for establishing minimum renewable purchase obligations (RPOs) at
the state level. In India, since it is a concurrent issue, both the federal and
state governments have policies governing it. Based on their understanding of
regional resource availability and its effect on retail tariffs, SERCs were to
set the RPOs.
The RPO is a crucial policy element
in modifying the profile of energy use and ensuring demand for power produced
using renewable sources. The National Tariff Policy allowed for some
flexibility in how RPOs were determined by SERCs (lower RPO in states with few
renewable resources), but it was anticipated that over time the states would
improve their renewable energy mix availability and the impact on retail
tariffs.
Through
REC mechanism, a power generator may generate electricity using renewable
energy sources in any part of the country and can trade it through Power Exchanges
at the market determined prices. There are three Power Exchanges in India; Hindustan
Power Exchange (HPX), Indian Energy Exchange (IEX), Power Exchange India
Limited (PXIL).
Features of RECs
|
Particulars
|
Description
|
|
REC
Types
|
Solar
REC
|
|
Non-Solar
REC
|
|
|
Trading
Platforms
|
CERC
approved Power Exchanges
|
|
REC
SI-unit
|
1
MWh
|
|
Validity
period
|
1095
Days
|
|
Resale
of Certificates
|
Not
Allowed
|
|
Banking
|
Not
Allowed
|
|
Eligibility
|
Grid
connected Renewable Energy Technologies approved by MNRE
|
|
Trading
Entities
|
Eligible
Entity
|
|
Obligated
Entity
|
|
|
Voluntary
Entity
|
|
|
Forbearance
Price
|
As
per CERCs circular
|
|
Floor
Price
|
As
per CERCs circular
|
|
Trade
hours
|
Last
Wednesday of the month or as per the circular issued by the exchange (During
Holidays)
|
Central
Electricity Regulatory Commission in exercise of powers conferred under
sub-section (1) of Section 178 and Section 66 read with clause (y) of
sub-section (2) of Section 178 of the Electricity Act, 2003[19] has
come up with REC Regulations, 2022[20] for
development of power sector market renewable energy through renewable energy
certificates.
These
Regulations includes the following framework:
i.
National Load Despatch centre is a Central
Agency and its functions are specified.
ii.
Who are Eligible Entities and eligibility for
issuance of RECs.
iii.
REC mechanism involves various steps
a.
Accreditation to the eligible entities for
REC
b.
Registration of the eligible entities for REC
c.
Issuance, exchange, and redemption of REC
iv.
Grant of Accreditation of Certificates
v.
Revocation of Accreditation
vi.
Grant of Registration for Certificates
vii.
Revocation of Registration
viii.
Issuance of Certificates
ix.
Exchange and Redemption of Certificates
x.
Denomination of Certificate
xi.
Pricing of Certificates
xii.
Validity of Certificates
xiii.
Fees and Charges
The detailed Procedure for implementation of REC mechanism in
compliance with REC Regulations, 2022 as follows:[21]
i.)
Procedure for Accounting of Generating in Respect of Eligible
Entities
Renewable Energy Generating Station (REGS) based on Hybrid technology
i.e. with a combination of two or more renewable sources of technology shall
require separate energy accounting for capacity linked to each source of
technology.
·
Eligible entities must submit meter data to
SLDCs/RLDCs
·
As per Grid Code SLDCs must prepare energy
accounts of intra-state entities and has to submit such energy accounts to
RLDCs in case of inter-state entities for the purpose of accounting the
renewable energy flow into the grid.
·
The eligible entities shall apply for
issuance of certificates by SLDC/RLDC based on energy account.
·
Energy injection data of eligible entities
will be submitted by SLDC/RLDC on REC web portal of Central Agency (NLDC) on
monthly basis.
·
NLDC shall issue Renewable Energy Certificates
to eligible entities based on the energy injection report submitted by
SLDC/RLDC.
ii.)
Procedure for Accreditation of REGS Including CGP Under REC Mechanism
by State Agency/RLDC
·
Application
for Accreditation by REGS/CGP to SLDC/RLDC.
·
Review
of Application by SLDC (in case of intra-state entity) / RLDC (in case of inter-state
entity).
·
Submission
of applicable Fees by REGS/CGP.
·
Grant
of accreditation by SLDC/ RLDC.
iii.)
Procedure for Registration of REGS Or CGP Or Distribution
Licensee or Open Access Consumer, by Central Agency (NLDC)
·
Application
for Registration by REGS/CGP/Distribution Licensee/Open Access Consumer to
Central Agency.
·
Review
of Application by Central Agency.
·
Submission
of applicable Fees by Eligible Entity.
·
Grant
of registration by Central Agency.
iv.)
Procedure for Issuance of Renewable Energy Certificate to The
Eligible Entity by Central Agency (NLDC)
·
An application shall be made
to NLDC by eligible entities for issuance of renewable energy certificates
through web portal/physical copy as per details provided in the Energy
Injection Report (EIR) with duly singed and stamped by authorized signatory.
In case user of CGP
routes power through Open Access for self-consumption, such quantity is
accounted as self-consumption and accordingly will be considered for issuance
of RECs which are not eligible for sale. Self-consumption of such open access
user will be as per schedule.
·
After receipt of the
application by eligible entities, NLDC will undertake preliminary scrutiny and
all the attached documents will be verified.
·
After the preliminary
scrutiny, NLDC shall intimate the applicant in writing for furnishing of any
further necessary information or documents. Further, NLDC can accept or reject
the application
·
While considering the
application for RECs, NLDC shall check the availibilty of the following
information:
o The Time period for which the RECs are issued.
o Eligible entity has duly certified EIR by SLDC/RLDC.
o Confirmation of Compliance Auditor Report.
o Payment for REC issuance fee by Eligible Entity through
online payment within 15 days from the date of application by NLDC.
·
NLDC shall issue RECs only
after confirming the claims made by the Eligible Entity, with duly certified
EIR by SLDC/RLDC/Recommendation of SERC for issuance RECs.
The denomination of each REC as per REC Regulations,
2022 is 1MWh of electricity generated through renewable energy source. Certificates shall be issued in accordance
with the assigned Certificate Multiplier as per clause 12(2) of REC Regulations,
2022.
·
NLDC shall issue RECs to the
Eligible Entity within 15 days from the date of receipt of application along
with necessary information and payment of issuance fee.
·
NLDC may reject the
application if Eligible Entity has failed to provide with necessary information
within stipulated time period.
·
Upon issuance of RECs, NLDC
shall make the details available to the respective SLDC/RLDC.
v.)
Procedure for Redemption of Renewable Energy Certificate
The NLDC being the Central Agency shall maintain the
registry of RECs issued and these RECs can be exchanged in two ways:
a)
Exchange through Power
Exchange
b)
Exchange through Electricity
Trader
The REC once exchanged or redeemed or used for the RPO
compliance of the obligated entity shall redeemed and cannot be subjected to
further usage or redemption.
a)
Procedure for redemption
through Power Exchange(s)
·
The Power Exchange shall be
registered with NLDC on web portal.
·
Eligible Entities can place
RECs for trade on any registered Power Exchange as per REC Regulations.
·
During the biding period,
Eligible Entities and buyers quote their offer and bid prices respectively.
·
The Power Exchange(s) shall
send the offers and bids to the NLDC for the verification of the available
quantity and price of RECs.
·
The combined maximum bid
volume shall be checked by the NLDC and it shall send a report to Power
Exchange(s) for confirming the availability of the RECs with the Eligible
Entity. Further, Power Exchanges will determine the market price and
accordingly the bids will be transacted.
b)
Procedure for redemption
through Electricity Trader(s)
·
The Electricity Trader(s)
shall be registered with NLDC on wen portal.
·
NLDC is informed of the
number of certificates which the Eligible Entity is intended to sell through
Electricity Trader(s). The Eligible Entities who are intended to trade RECs
through Electricity Trader(s) must apply online every month. These are traded
on First come First serve basis.
·
The RECs which are blocked
by NLDC for solely to be traded through Electricity Trader(s) until it is
deblocked by the NLDC upon the request of Eligible Entity.
·
The
Electricity Trader will take the seller code and the buyer code from the NLDC.
·
Within
3 working days of the trade request placed by the Electricity Trader, the
Eligible Entity shall accept the same, otherwise, NLDC will reject the
application.
·
The
Transaction of RECs and Accounting of valid certificates will be maintained by
the NLDC on successful completion of transaction or otherwise.
It is very apparent looking at the
legal and regulatory framework that India is having a robust REC mechanism
which is highly regulated with a system of checks and balances at various
levels of governance. The redemption of RECs is completed operated through
Power Exchanges with complete transparency of the Power market.
Over few years, industries are more
conscious of the electricity consumption through renewable energy sources and
Introduction of Renewable Purchase Obligation Under Section 86(1)(e) of the Electricity Act, 2003[22] and the National Tariff Policy, 2006 created
obligation on the entities to mandatorily use some percentage of renewable
energy out of their total electricity consumption. This RPO percentage varies
from every state in India.
the Hon’ble Supreme Court also gives
obligated entities the option of purchasing RECs to comply with RPO
regulations.[23]
Table
1: Data of RECs which are issued and redeemed in the past 1 year
by REC registry of India.[24]
This
data clearly shows how RECs market is very promient in India energy sector.
India is moving towards Green energy and sustainbility.
Additional scope has been provided to
Renewable Energy (RE) generator(s) by REC mechanism to sell the power which is
generated locally to DISCOM as well as through open access consumer(s). As on
March 2018, total capacity of 6,022 MW has been registered under REC mechanism.
After notification of CERC Regulations on January 14, 2010, around 4,360 MW
have been commissioned and registered under the REC mechanism, amounting to
capital investment of more than Rs. 23,000 crores, as per the standardized
capital cost notified by the CERC in the renewable energy tariff regulations.
Moreover, number of registered projects, number of transactions, traded value
of RECs which is about Rs. 8,54,29,650 crores if the cost of 1 unit of REC is
Rs.1000. These figures have created a positive impact on investors towards renewable
energy sector.[25]
Almost 30,000 RECs have been
purchased by voluntary buyers including companies, institutions, and
individuals. The stakeholders’ response proves the potential of the voluntary
market in India. To further enhance the potential of the voluntary market,
appropriate regulatory and policy measures are required to increase the
purchase of RECs by volunteers.[26]
The International REC Standard (I-REC
Standard) is a non-profit foundation with the objective of empowering
electricity purchasers with the ability to make renewable consumption options
in any part of the world. I-REC Standard foundation enables the ability to
purchase and sell renewable electricity for electricity suppliers, consumers,
brokers, traders, electricity generators and national governments.
The International REC (I-REC) is a
tracking system that supports compliance tracking with requirements of
governmental renewable energy, as well as voluntary consumers to track and
verify progress towards their environmental goals. This allows tracking the
characteristics of (renewable) electricity production from its location of
generation to its place of consumption. Such as the location of the electricity
generator, the type of primary energy input, the date of commissioning, the
installed capacity, the volume and timing of electricity production, are all
factual attributes that can be tracked with the I-REC tracking system. This
tracking takes place in the form of a digital statement, or I-REC standard
certificate which is based on one MWh of electricity production from a single,
generation facility. Ownership of this digital statement allows consumers of
electricity to claim the attributes of a particular generating facility.[27]
United Kingdom
It started with NFFO scheme, wherein
the generators are awarded the contracts to purchase the renewable electricity
at premium price for a specific time period. Lately, this scheme was replaced
with Renewable Obligations (RO). RO was brought through Utilities Act, 2000.
Under the new scheme all the distributors shall buy a portion of total
electricity supplied from renewable sources. The obligated percentage is
increased from 3% in 2002 to 20% in 2020. The Office of Gas and Electricity
Markets (OFGEM) is the administering and regulating authority for this scheme.
Under this scheme, the generators get
ROCs for the quantity of electricity that is generated from renewable sources
and can sell them in the open market or can sell to companies who fail to meet
their obligations. If the generators are connected to grid then they can inject
into grid and at the end of each year they receive the ROCs for the amount of
electricity feed into the grid.
United States of America
Renewable energy certificates (RECs)
have been the preferred instrument to overcome renewable power obligation. RECs
mechanism is a part of U.S. electricity markets, used to validate renewable
electricity purchasing, and use by the voluntary and compliance renewable
electricity markets. RECs provide the certification of electricity generated
from renewable resources, and these certificates are sold or traded
independently of the electricity. RECs are now commonly used to comply with a
state’s RPS, as part of a green power marketing strategy for retail consumers,
and as a source of additional revenue to support renewable energy projects.[28]
The RPS Program by central government
provides provision to obtain environmental attributes from generators and this
prevent generators from selling or transferring their environmental attributes
to others. a certificate-based tracking system is developed in the form of
renewable energy certificates (RECs), which would be easily redeemed through
NYSERDA (New York State Energy Research and Development Authority) as proof of
its purchase of renewable attributes. Thus, introduction of RECs has the
potential of establishment renewable energy market and opportunities for
achieving the mandatory compliance of the RPS Program.[29]
The U.S. Department of Energy (DOE)
Federal Energy Management Program (FEMP) recognizes that RECs “represent the
environment and technology features of energy generated from renewable
sources,” and it can be sold in the mega-watt hour of generated electricity,
which “enables customers to fulfil a percentage of their annual energy use with
certificates generated elsewhere.” FEMP mandates that federal agencies retain
ownership of RECs in order to show renewable energy consumption to comply with
the Energy Policy Act of 2005 and it supports that, “Retention of a REC that
expressly says that the Federal agency retains or stops transfer to other
parties of all renewable energy certificates of the project is the best
practice of meeting this standard.”[30]
This market-based instrument also
supported by the court in United States on the legal basis of RECs as
attributes and property rights. For example, the Apex Court of New Jersey has
recognized that “One Renewable Energy Certificate represents the environmental
benefits of one megawatt-hour of electricity generated through renewable energy
sources,” and RECs are considered “property.”[31]
Japan
It was in 2003, the Japan introduced
RPS law which states that a certain portion of total electricity procured by
the distributors has to be from renewable energy sources. Under this law, the
distributors of electricity can fulfil their obligations through generating
& purchasing electricity from renewable sources or by purchasing “New
Energy Certificates” (NECs).[32]
There is no floor price of the
certificate which is set but 11Yen/KWh the ceiling price and the price is
decide through market-based mechanism. Further, for non-compliance of the
obligations there is huge penalty up to 10 Lakh Yen will be imposed.[33]
Further, there is unregulated trading
system which is for voluntary users of renewable energy that is known as Green Power
Certification System that is managed by Japan Natural Energy Company Ltd.
Through this system corporates/companies can either generate on it own or out-source
the same. The "Certification of Green Power" is received by the
consumers renewable energy. These certificates are verified and recorded by the
Green Power Certification Council.[34]
RECs as a market-based instruments which are introduced to
promote the renewable energy and sustainability. This is an innovative move
towards the climate change and environment as it creates an obligation on
industries to purchase the renewable energy directly or generate on own or in
form of RECs for portion of their total electricity consumption which bring a
positive impact towards the environment and helps to mitigate the effects of
climate change. As per the data and reports mentioned above RECs are highly
successful instruments which are widely traded and it is increasing the
investment towards renewable energy markets.
India has recently come up with REC regulations, 2021. These
regulations are very well framed for having a robust mechanism that it is very
much evident from the compliance mechanism of the Eligible Entities and
involvement of Nodal agencies in this system for proper function.
Not only in India the RECs are encouraged but also across the
global there many countries which have the renewable power certification system
which are introduced in the early 21st century. Major 1st
world countries like USA and Japan are having various mechanisms for promoting
the green energy and its usage by creating obligation on the users.
Yes, RECs mechanism is a very efficient and effective method
to have tracking and accounting on the renewable energy usage out of total
energy consumption. Further, it helps to bridge the gap of non-uniform
availability of renewable energy. Through this system it become very convenient
for renewable energy markets to have check on the developments and investments
towards this sector. Ultimately, REC mechanism is sustainable and promote green
energy.
However, there are challenges and issues faced and these issues need to be addressed and the
way forward regarding a smooth functioning of the REC mechanism specifically in
India as follows:
i.
RPO compliance: Strict enforcement of RPO compliance
is fundamental for vibrant REC market in the country. Therefore, there should
be dedicated regulatory authority which will govern this mandatory compliance
towards industries and corporation. Similar to that of Japanese system India
must also consider to impose the heavy financial penalty on those who does not
meet the Renewable purchase obligations.
ii.
Mismatch Between Demand and
Supply of RECs: it
should be ensured that there are enough measures to regulate the prices at
power exchanges as supply of RECs is more in comparison to demand due to which RECs
are left untraded. Looking that the numbers given in the Table 1, there are
substantial number of RECs which are left untraded. To overcome this issue,
Demand for RECs has to be increased and this can be done through State
Electricity Regulatory Commission by increasing the RPO percentage for each
state in India.
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Legislations
·
The
Electricity Act, 2003, No. 36, Acts of Parliament, 2003 (India).
·
REC
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·
Procedure
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Grid-India, Renewable Energy Certificate
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nic.in/index.php/publics/index (last visited Apr. 9,
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Ernst and Young, Mapping India’s Renewable
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Ministry of New and Renewable Energy
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United
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[1] Aaron
Atteridge, Manish Kumar Shrivastava, Neha Pahuja and Himani Upadhyay, Climate
Policy in India: What Shapes International, National and State Policy?, 41 Ambio , 68 (2012).
[2]
Ernst and Young, Mapping India’s Renewable Energy Growth Potential: Status
and Outlook 2013, National Institute
of Urban Affairs, https://smartnet.niua.org/sites/default/files/resources/EY-Mapping-Indias-Renewable-Energy-growth-potential.pdf.
[3]
S. K. Kar and P. K. Sinha, ‘Ensuring Sustainable Energy Security: Challenges
and Opportunities for India, 12 Oil,
Gas & Energy Law Intel., 8 (2014).
[4] Sanjay
Kumar Kar, Renewable Energy Market Developments: A Study of India, 6 Renewable Energy Law and Policy Review,
238 (2015).
[5] The Electricity Act, 2003, No. 36,
Acts of Parliament, 2003 (India).
[6] Grid-India,
Renewable Energy Certificate Registry of India, https://www.recregistryindia.nic.in
/index.php/publics/index (last visited Apr. 9, 2023).
[8] Ministry
of New and Renewable Energy (MNRE)-Government of India, https://mnre.gov.in/the-ministry/what-does-the-ministry-do/ (last
visited Apr. 9, 2023).
[10]
Ministry of New and Renewable Energy (MNRE)-Government of India, https://mnre.gov.in/solar/current-status/ (last
visited Apr. 9, 2023).
[11] Power
Grid Corporation India Limited, Desert Power India-2050, Integrated Plan for
Desert Power Development’, [Dec. 2013], https://www.powergrid.in/sustainability (last
visited Apr. 9, 2023).
[12] MNRE,
supra note 7, at 4.
[13]
Ministry of New and Renewable Energy (MNRE)-Government of India, https://mnre.gov.in/wind/current-status/ (last
visited Apr. 9, 2023).
[14]
Ministry of New and Renewable Energy (MNRE)-Government of India, https://mnre.gov.in/small-hydro/current-status (last
visited Apr. 9, 2023).
[15]
Ministry of New and Renewable Energy (MNRE)-Government of India, https://mnre.gov.in/waste-to-energy/current-status (last
visited Apr. 9, 2023).
[16] Ministry
of New and Renewable Energy (MNRE)-Government of India, https://mnre.gov.in/bio-energy/current-status (last
visited Apr. 9, 2023).
[17] Electricity Act, supra note
5, at 3.
[19] The Electricity Act, 2003, § 66,
178(1), 178(2)(y), No. 36, Acts of Parliament, 2003 (India).
[20] REC Regulations, 2022, Central
Electricity Regulatory Commission, May 9, 2022, https://cercind.gov.in/
regulations/REC-Regulations-2022.pdf.
[21] Procedure for implementation of
REC mechanism, GRID-India, Dec. 2022, https://www.recregistryindia.nic.in
/pdf/REC_Procedures.pdf.
[22] The Electricity Act, 2003, §
86(1)(e), No. 36, Acts of Parliament, 2003 (India).
[23] Hindustan Zinc Ltd. v. Rajasthan Electricity, Supreme Court of India, Civil Appeal No. 4417 of 2015, (order date: May 13, 2015).
[24] Renewable Energy Certificates
Registry of India (Grid-India), https://www.recregistryindia.nic.in/ (last visited Dec. 3, 2023).
[25] Renewable Energy Certificates
Registry of India (Grid-India), https://www.recregistryindia.nic.in/pdf/Others/
Report_on_REC_Mechanism.pdf
(last visited Apr. 13, 2023).
[26] Id.
[28] The Power of Renewables: Opportunities and
Challenges for China and the United States, Washington, DC: The National Academies Press 2010, https://doi.org/10.17226/12987.
[29] Todd Jones, The Legal Basis for
Renewable Energy Certificates, Center
for Resource Solutions (Apr. 2023), https://resource-solutions.org/wp-content/uploads/2015/07/The-Legal-Basis-for-RECs.pdf
[30] Id.
[31] In re Ownership of Renewable
Energy Certificates ("RECs''), 913 A.2d 825 (N.J. 2007).
[32] Kriti Bhardwaj, REC MECHANISMS
IN DIFFERENT COUNTRIES, Great Lakes
(Jan. 14, 2011), https://www.greatlakes.edu.in/gurgaon/sites/default/files/REC_mechanism_in_different_countries.pdf
Article Information
SUSTAINABILITY OF RENEWABLE ENERGY: AN ANALYSIS OF INDIA’S RENEWABLE ENERGY CERTIFICATES REGIME.
Authors: KAPULURU SAIVARUN
- Journal IJLRA
- ISSN 2582-6433
- Published 2024/08/17
- Issue 7
About Journal
International Journal for Legal Research and Analysis
- Abbreviation IJLRA
- ISSN 2582-6433
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