Analysis of the demand-supply scenario of renewable energy certificates
Student name: Mr Mridul Chadha
Guide: Dr Najmur Rahman
Year of completion: 2011
Host Organisation: Regent Climate Connect Knowledge Solutions Limited
Supervisor (Host Organisation): Mr Nitin Tanwer
Abstract: Following the Copenhagen climate change conference in December 2009, the Indian government
announced a non-binding target of reduction carbon intensity by 20 to 25 percent from 2005
levels by 2020 as a Nationally Appropriate Mitigation Measure. The achievement of this relies
on, among other things, the significant expansion of the renewable power generation
infrastructure in the country.
In this regard, the Central Electricity Regulatory Commission released regulations regarding the
Renewable Purchase Obligation, whose roots can be traced to the Energy Conservation Act
2001. The Renewable Purchase Obligation regulation mandates certain entities — distribution
licensees, open access power consumers and captive power plants — across all states to procure
a certain minimum percentage of their annual power consumption from renewable energy-based
power projects.
To aid the states governments and these entities fulfill their obligations, the CERC also launched
the Renewable Energy Certificate mechanism which allows them to buy renewable energy
certificates from renewable energy project developers to meet their annual targets. The CERC
also mandated their entities to procure a certain minimum percentage of their power
consumption from solar power projects. Thus creating two sets of renewable energy certificates
— solar and non-solar. These certificates can be traded between a price band specified by the
CERC.
The supply-demand situation of these certificates depends on several factors. These include, the
technology most dominant in the REC mechanism, the power consumption of various states, the
dominant technology in the REC mechanism, variation in the Annual Pooled Power Purchase
Cost, the seasonality of REC generation and the frequency of fulfillment of the RPO targets.
By studying and understanding the likely supply-demand scenario in the REC mechanism, a very
useful tool for the obligated utilities as well as the renewable energy project developers can be
built which would enable them analyze the REC market and generate profits by helping them
take informed decisions.
