LONDON — India’s Renewable Energy Certificate (REC) trading fell by 87 percent in May, according to the Indian Energy Exchange (IEX), with sellers outnumbering buyers for the first time. Total trading volume fell to 19,212 compared to 153,130 in May 2012, IEX said in a statement.
The crash is due to a supply glut that is expected to continue as the number of RECs injected into the market keeps pace with or outpaces the number purchased. And in a new development, the solar renewable energy credit (SREC) market, which has hitherto been more resilient than the wider REC market, hit its lowest price to date, said an analysis by RESolve Energy Consultants in Chennai. RESolve noted that buy bids for SRECs fell 76 percent from the previous month.
Hari Manoharan, an analyst with RESolve’s solar and wind energy division, expects the SREC supply to increase due to numerous REC-based power projects coming up in Rajasthan, and suggests that unless counter-measures are rapidly taken, the SREC market could suffer the same collapse as the wider market.
Under the nation’s renewable energy purchase obligation (RPO), Indian power distribution companies are required to buy 5-10 percent of their electricity from renewable sources or purchase RECs in lieu. Project developers are granted one REC for every 1 MWh generated from renewable sources.
The Economic Times newspaper called the poor market showing “a reflection of dwindling interest” in RECs, reporting that developers have accumulated over 21 lakh (2100,000) RECs while barely 2 percent of this amount was sold in May. The IEX said: “Distribution companies and captive power generators did not participate in the market despite the fact that many of these entities are yet to fulfill a large share of their obligation.”
Penalties for non-compliance with the RPO “have not been enforced to a significant extent,” according to Sanjay Chakrabarti, head of Ernst & Young’s India cleantech practice. The falling interest in the market is a clear indicator that there is a need for a strict enforcement of RPO regulations by state electricity regulatory commissions, the IEX said. And Suresh Prabhu, a former environment minister and power minister, has said investment in Indian renewable energy is at risk, blaming regulators for their inability to enforce the RPO.
“[The] Renewable Purchase Obligation is part of the Electricity Act itself and regulator has to decide its quantum from time to time. Non-compliance of this obligation will jeopardise investments in [the] renewable sector,” Prabhu said.
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