IEX, the country’s leading power exchange, has received approval of the Central Electricity Regulatory Commission (CERC) to launch a ‘green term-ahead' market.

The implication of this is that the various state and private sector owned electricity distribution companies (discoms) and large consumers, such as cement or steel plants – which are ‘obligated entities’ mandated by law to buy a portion of their electricity demand from renewable sources—will now be able to discharge their ‘renewable purchase obligations’ (RPO) by buying power from renewable energy companies in the exchange.

Now wind and solar companies, if they have any surplus after meeting their commitments made under long term power purchase agreements can offer their power in the market. Indeed, it is possible for a renewable energy company to put up a plant and sell all its generation over the market.

What the green market does is, it confers recognition on a trade as ‘green’ power. Earlier, a wind or a solar company, if it had any surplus power could offer it in the market and claim tradeable ‘renewable energy certificates’ (RECs). But the buyer of the power, if he were an ‘obligated entity’, could not claim that he had met his ‘renewable purchase obligation’ (RPO). Now, if a wind, solar, small hydro or biomass energy company sells its power on the green market, it could presumably get a higher price because the buyers would be mostly the obligate entities. But the seller cannot claim REC. On the other side, the buyer can buy the power to satisfy his RPO.

IEX would get more commission income if renewable energy companies and obligated entities flock to the exchange. It is, however, a moot point whether there would be much energy to sell, because wind and solar companies put up their projects only after signing long term power purchase agreements. However, discoms, which buy power at very low prices from wind and solar companies can offer any ‘surplus’ in the market.

“The new market segment will support states with surplus renewables to sell while the buyers will be able to procure energy as well as meet the renewable purchase obligations,” says a press release issued by IEX today.

IEX has said that it would offer trade in four types of green term-ahead contracts -Green Intra-day contracts, Day-ahead Contingency contracts, Daily Contracts and Weekly contracts. There will be separate contracts for Solar and Non-Solar energy to facilitate Solar and Non-Solar Renewable Purchase Obligations fulfilment.

Today, power generators (renewable or otherwise) are allowed to sell for delivery within 11 days. But forward contracts are soon to be allowed, because the question whether power regulator CERC or the market regulator, SEBI would have jurisdiction over such contracts, is nearing resolution.

When that happens, renewable energy companies could oversize their plants and sell surplus on the market.