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Renewable Energy Certificates (RECs) in India – A performance analysis and future outlook

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  • Narula, Kapil

Abstract

Well designed Renewable Energy (RE) policies and their effective regulation is the key to promote RE generation in the world. Renewable Energy Certificate (REC) mechanism is a market-based policy instrument which facilitates Renewable (Energy) Purchase Obligations (RPOs) in order to increase RE generation in a country. The recently conceived and implemented REC mechanism in India attempts to involve various stakeholders in an economically efficient manner and has been effective in its first year of operation. The paper commences with the background and the genesis of REC mechanism in India. It characterises the REC trading mechanism and analyses the performance of the REC market for the FY 2011–12. Comparing the financial viability for sale of RE by project developers in certain key states, the paper shows that REC mechanism is more profitable than entering into a Power Purchase Agreement (PPA) for sale of RE at Preferential Tariff (Feed-in-Tariffs). Thus, the REC market which has attained a size of 2.3 billion INR in its first year of existence is forecasted to grow manifold in the future and the paper attempts to forecast the market size in near term. Further analysis of the REC market reveals that although there are inherent advantages of the REC mechanism over other methods of promoting growth of RE, the market is currently subject to various distortions and the paper suggests few steps for correcting these distortions by appropriate market re-design. The paper concludes that the REC market mechanism has gained momentum and can effectively promote RE generation in an economically efficient manner, with benefits to all stakeholders, provided it is strictly implemented and continuous corrections are given in the right direction by the market regulator.

Suggested Citation

  • Narula, Kapil, 2013. "Renewable Energy Certificates (RECs) in India – A performance analysis and future outlook," Renewable and Sustainable Energy Reviews, Elsevier, vol. 27(C), pages 654-663.
    • Handle: RePEc:eee:rensus:v:27:y:2013:i:c:p:654-663
    DOI: 10.1016/j.rser.2013.07.040
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    References listed on IDEAS

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    1. Goyal, Mohit & Jha, Rakesh, 2009. "Introduction of Renewable Energy Certificate in the Indian scenario," Renewable and Sustainable Energy Reviews, Elsevier, vol. 13(6-7), pages 1395-1405, August.
    2. Singh, Anoop, 2009. "A market for renewable energy credits in the Indian power sector," Renewable and Sustainable Energy Reviews, Elsevier, vol. 13(3), pages 643-652, April.
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    Cited by:

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    2. Indora, Sunil & Kandpal, Tara C., 2019. "A framework for analyzing impact of potential financial/fiscal incentives for promoting institutional solar cooking in India," Renewable Energy, Elsevier, vol. 143(C), pages 1531-1543.
    3. Amrutha, A.A. & Balachandra, P. & Mathirajan, M., 2017. "Role of targeted policies in mainstreaming renewable energy in a resource constrained electricity system: A case study of Karnataka electricity system in India," Energy Policy, Elsevier, vol. 106(C), pages 48-58.
    4. Irfan, Mohd, 2021. "Integration between electricity and renewable energy certificate (REC) markets: Factors influencing the solar and non-solar REC in India," Renewable Energy, Elsevier, vol. 179(C), pages 65-74.
    5. Choi, Dong Gu & Park, Sang Yong & Hong, Jong Chul, 2015. "Quantitatively exploring the future of renewable portfolio standard in the Korean electricity sector via a bottom-up energy model," Renewable and Sustainable Energy Reviews, Elsevier, vol. 50(C), pages 793-803.
    6. Gacitua, L. & Gallegos, P. & Henriquez-Auba, R. & Lorca, Á. & Negrete-Pincetic, M. & Olivares, D. & Valenzuela, A. & Wenzel, G., 2018. "A comprehensive review on expansion planning: Models and tools for energy policy analysis," Renewable and Sustainable Energy Reviews, Elsevier, vol. 98(C), pages 346-360.
    7. Izanloo, Milad & Aslani, Alireza & Zahedi, Rahim, 2022. "Development of a Machine learning assessment method for renewable energy investment decision making," Applied Energy, Elsevier, vol. 327(C).

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