The Hindu Business Line : ‘Green tags’ to enable trading of renewable power on the anvil

“The certifications would enable renewable deficit States to tide over their Renewable Purchase Obligation and spur higher green power generation in surplus States.”

Anil Sasi

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New Delhi, June 6 The development of a ‘Renewable Energy Certificate’ (REC) mechanism is on the anvil. It is aimed at evolving a mechanism to designate ‘green power’ as a tradable commodity and promote inter-State sales of renewable generation.

The Government is in the process of hiring consultants for the development of a REC mechanism for India on the lines of ‘green tags’ being used in the US and the UK, which would provide a platform for trading between renewable energy surplus and deficit States, with provisions for a clearing house mechanism and energy accounting framework to recognise RECs as a tradable commodity.

The move comes in the wake of a number of State Electricity Regulators having firmed up Renewable Purchase Obligation (RPO), making it mandatory for all distribution utilities to source a minimum quantum of electricity annually from renewable sources.

While States such as Tamil Nadu and Karnataka have already approached the 10 per cent mark for renewable procurement (as prescribed under the RPO), many States are not procuring even 1 per cent of their obligation.

As a result, States which have already reached very high level of renewable procurement are reluctant to procure more ‘green power’ while those with lower potential are not able to procure power from renewable rich States.

“The certifications would essentially create a nationwide market for renewable energy, enabling renewable deficit States to tide over their RPOs and spur higher green power generation in surplus States,” a Government official involved in the exercise said.

US experience

In the US, Tradable Renewable Certificates (TRCs) represent proof that 1 megawatt-hour (MWh) of electricity was generated from an eligible renewable resource. These certificates can be traded and the owner of the TRC can claim to have purchased renewable energy.

A certifying agency gives each certificate a unique identification number to make sure it does not get double-counted. The green energy is then fed into the electrical grid, and the accompanying TRC can then be sold on the open market.

In the UK, the Renewables Obligation (RO) places an obligation on licensed electricity suppliers to source an increasing proportion of electricity from renewables. Suppliers meet their obligations by presenting Renewables Obligation Certificates (ROCs).

Where suppliers do not have sufficient ROCs to cover their obligation they must make a payment into a buy-out fund, with the proceeds being paid back to suppliers in proportion to the ROCs they have presented.

Higher tariffs

In India, so far, State utilities have generally been reluctant to purchase green power because tariffs have been higher than the average cost of power procured from conventional sources, and also because its generation pattern has no relationship with the grid load profile.

There have been instances when State utilities have asked the wind plants to stop generation under low grid load conditions, because it would have been necessary otherwise to backdown “cheaper” thermal generation.

With the RPO mechanism still in the evolution stage in India, more States are likely to follow the example of the 12 States, where regulators have already implemented the green obligations. The REC mechanism is expected to give a further fillip to the renewables sector.

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