Here's the link to Renewable Energy Certificate FAQ's, published by IEX (Indian Energy Exchange), a facilitator of Renewable Energy Certificate (REC) trading in India.
But what is this Renewable Energy Certificate? REC (in short) refers to an asset that is offered to renewable energy producers (except those companies that sell renewable energy at a preferential price agreement or have availed certain special concessions) who can in turn sell it to companies that want to buy them, mainly due to the renewable energy obligation rules enforced by many states in India. Of course, companies that do not come under the renewable energy obligation scheme can also buy REC's to reduce/offset their carbon emissions.
1 REC = 1 MWh of electricity produced using renewable energy technologies/sources, in India.
Renewable Energy Certificates have a validity of one year and a company that has obtained REC's can sell it to others within that time period.
Who will buy REC's? It is required that electricity producers should produce a certain percentage of their power, through renewable energy sources. If they don't do it, they can purchase REC's for the remaining (shortage) value. In many states, large companies/organizations who are HT customers/are provided uninterrupted power (like SEZ), come under Renewable Energy Obligation, where a certain percentage of their total power requirement, should either be produced using renewable energy by themselves (or) they can procure renewable power from renewable energy power plants (or) they can buy renewable energy certificates, in order to fulfill their obligation.
Every state has its own requirement for renewable energy obligation, and companies/organizations could sell/buy REC's through power exchanges like IEX. Currently the REC's can be used/sold only once and their subsequent transfer is not allowed. There is a maximum price and minimum price for REC's and buying the REC's at the maximum price is the penalty for non-compliance. REC trading happens through the power exchange via closed double sided auctions.
The objective of renewable energy certificates and renewable energy obligations is primarily to encourage large consumers of electricity to produce more power using renewable energy technologies or buy it from people who generate power through renewable power technologies. This will encourage RE power producers to invest in renewable power generation, and in increasing their existing renewable power generation capacity.
Companies like Google in the US are striving to become carbon-neutral by manufacturing their own renewable energy, buying power from renewable energy producers, etc. Becoming carbon-neutral is a vision that only visionary/socially responsible companies can achieve. Such a vision will definitely impact all other activities and project a positive image for the company. Many companies actively advertise their green credentials in order to get a better public acceptance/appreciation for their services.
In India, the Govt. is mandating that only a small percentage of the power requirements (for large companies) be fulfilled through renewable energy. This is in line with similar developments happening globally. As you may be aware, there is acute shortage of power in India and hence if all companies comply with this regulation, our power availability situation will improve drastically.
Generating electricity through renewable energy sources is a much better option, than buying REC's to comply with regulations. Renewable energy generation technologies have improved and their power conversion efficiency has increased, in the recent times. Hence they can even pay your investments back in a few years, with or without REC's.
Have a look at this report (pdf, published by Greenpeace) to understand how Renewable Energy Obligation (RPO) has been implemented in each state.
Have a look at this report (pdf, published by Greenpeace) to understand how Renewable Energy Obligation (RPO) has been implemented in each state.
