Final order on new energy rules in two weeks

While power utilities and traders have generally welcomed the Central Electricity Regulatory Commission's draft regulations on renewable energy certificates (RECs), they have warned that the short supply of renewable energy (RE) may encourage speculative activity and volatility in the already tight market.

However, the power exchanges-- Indian Energy Exchange and Power Exchange India --have welcomed the provision of trading RECs through exchanges.

CERC chairman Pramod Deo told Business Standard, "CERC will issue the order to release final regulations in two weeks. The objective is to promote RE in the context of uneven distribution of RE resources in the country." The draft rules were issued around three months earlier.

At the oral hearing on December 15, power developers and traders brought to the CERC's notice that existing RE sources are already tied up and will not generate certificates. Moreover, states with large renewable energy sources may deny open access under the power deficit scenario.

PTC India, which has over half the share in the power trading market, said trading of certificates or price discovery should not be limited to the exchanges. Market participants should get other options, including bilateral sale and banking, aggregation by intermediaries/portfolio managers and forward sales. It said these options would enhance competition, provide more price stability and securitisation to developers. And, the REC validity should be for at least three years, instead of the one year proposed in the draft regulations.

Gujarat Urja Vikas Nigam (GUVN) said wind energy creates problems like uncertain generation, grid congestion and grid security. Other landlocked states like UP, MP, Bihar, Punjab and Chhattisgarh have lack of wind potential and facility for procurement of power from RE sources. According to the GUVN, a distribution licensee which cannot afford the pooled cost should not be obligated to pay for unscheduled RE injections at the pooled cost which may at time be equivalent to preferential tariff.

The MCX-promoted Indian Energy Exchange (IEX) suggested that the energy produced from all renewable generators should receive RECs. Discoms and other consumers with power purchase agreement (PPA) at preferential rates are entitled for receipt of REC on evidence of PPA.  This would help create a liquid market and better price discovery. RE units which are not off-grid (as with micro units in rual areas, for local use) should also be eligible to get RECs for their generation.

According to PXI, though the regulations have touched upon almost all aspects of recognition and issuance of RECs, those on transaction have not been touched upon and are still awaited.