Central Electricity Regulatory Commission (CERC) recently issued an order on determination of forbearance and floor price for the REC framework.
As per regulation of the REC Regulations, the Commission may, in consultation with the Central Agency (Power System Operation Corporation Limited) and Forum of Regulators from time to time provide for floor price and forbearance price separately for Solar and Non-solar Renewable Energy Certificates (RECs).
REC Regulations provides for the guiding principles for determining the forbearance price and floor price for RECs.is as under (1) The price of Certificate shall be as discovered in the Power Exchange: Provided that the Commission may, in consultation with the Central Agency and Forum of Regulators from time to time provide for the floor price and forbearance price separately for solar and non-solar Certificates. (2) The Commission while determining the floor price and forbearance price shall be guided inter- alia by the following principles: (a) Variation in cost of generation of different renewable energy technologies falling under solar and non-solar category, across States in the country; (b) Variation in the Pooled Cost of Purchase across States in the country; (c) Expected electricity generation from renewable energy sources including:- (i) expected renewable energy capacity under preferential tariff (ii) expected renewable energy capacity under mechanism of certificates; (d) Renewable Purchase obligation targets set by State Commissions”
On order dated 1st June, 2010 for ‘Determination of Forbearance and Floor Price for the REC framework commission prescribed forbearance price and floor price for RECs as under:
Above determined forbearance price and floor price were valid for the period up to 31.03.2012.
Thereafter, the Commission on 23.08.2011 determined the following forbearance price and floor price for the period from 01.04.2012 to 31.03.2017:
Subsequently, based on review of solar PV tariff, the Commission vide on 30.12.2014 re-determined the following forbearance price and floor price for Solar REC for the period from date of order and up to 31.03.2017. The forbearance price and floor price for Non-solar REC were left unchanged in that Order.
On 30.03.2017 the Central Electricity Regulatory Commission determined the following forbearance price and floor price for Solar and Non-solar RECs applicable from 01.04.2017 onwards:
During the period between April 2017 and March 2020, the renewable energy landscape in the country has undergone a massive change. The tariff of solar and wind renewable energy projects has declined substantially during this period. Further, demand and supply of renewable energy has also undergone changes. In addition to solar projects, wind energy projects are also being awarded on the basis of competitive bidding conducted at National and State level. In view of the prevalent market conditions, floor price and forbearance price necessitated a review in order to balance the interests of eligible REC entities who are issued RECs and obligated entities who are required to purchase RECs for meeting RPOs.
The Commission proposed the following forbearance price and floor price for RECs vide Order dated 31.03.2020 in this Petition:
On the above proposal, comments/ suggestions of the stakeholders were invited by 20.04.2020.
Stakeholders such as Trbex Impex Pvt Ltd, Gujarat Ambuja Export, Vippy Industries, Seattle Powers Solution Pvt Ltd, LEE VEDLA- Tuhina Enterprises, Harsh Renewable Energy, Adhya Renewable Energy, Hindustan Platinum Pvt Ltd, Bonaterra Greenhouse LLP, Flow Devices System, Kreate Energy, Fortum India Pvt. Ltd., Tuhina Enterprises, Ujaas Energy Limited, Vikram Urethane Pvt. Ltd., IPF Vikram India Limited, Gupta sons, Star Delta Transformers Ltd, Sapphire Pro Ventures Pvt Ltd, SRS Engineers, Sharma Industries, MB Power Ltd, DharampalPremchand Ltd, Systematics Enterprises Pvt Ltd sought extension for submission of their comments due to nationwide lockdown due to Covid-19 pandemic.
At the request of the stakeholders, the Commission extended the date of submission of comments initially till 30.04.2020. Later, at the request of stakeholders to extend time due to the continuing lockdown situation, the Commission again extended the timeline for submission of comments till 08.05.2020.
Stakeholders such as Maharashtra Electricity Regulatory Commission, Tamil Nadu Electricity Regulatory Commission, Ministry of New & Renewable Energy (Government of India), ASSOCHAM, DNH Power Distribution, BSES Rajdhani Power Ltd, Confederation of Captive Power Plants Odisha, Dalmia Cement (Bharat) Ltd., Nava Bharat Ventures Ltd, Ambuja Cements, ACC Cement, Grasim Industries Limited, ONGC Hazira Plant, Southern Gujarat Chamber of Commerce & Industry, Alkali Manufacturers Association of India have supported the revision in forbearance price and floor price of RECs.
Cement Manufacturers Association, Welspun Group, RSPL Ltd, Chemplast Sanmar Ltd, GHCL Ltd., Tata Chemicals Ltd., Atul Ltd., Ultratech Cement, Grasim Industries-Birla Cellulosic, Tamilnadu Petro products Limited, AIA Engineering Ltd, Shell Energy India, Gujarat Chamber of Commerce & Industry and Alkali Manufacturers Association of India, DCM Shriram Limited, Arcelor Mittal Nippon Steel India Ltd, Finolex Industries Ltd, Meghmani Finechem Ltd, Hazira Area Industries Association,Vedanta Ltd., Shree Cement LtdSaurashtra Chamber of Commerce & Industry and Sanghi Industries Ltd. have requested to further reduce the REC forbearance price to Rs 500 for both solar and non-solar categories.
Stakeholders such as OIL India Ltd, NHPC, APP, FICCI, Basant Wind farms Pvt. Ltd., KarurSree Rama Trading Private Limited, Amirthaa Green Infra Private Limited, InWEA, Dhariwal Industries Pvt Ltd,Shri Tradco India Pvt Ltd, Bonafide Himachalies Hydro Power Developer Association, Sai Engineering Foundation, IWTMA, Prodigy Hydro Power Private Limited, BC Umpathy, Bharat Power Inc., Statkraft, Enel Green Power India Pvt. Ltd., Fasttrack Packers Pvt Ltd, ITC Limited, JVS Export, Sargam Retails Pvt Ltd, IPPAI, Manikaran Power Ltd., Agrawal Minerals (Goa) Pvt Ltd, Gangadhar Narsingdas Aggarwal Gurudnyanankit Energy Pvt. Ltd, Parekh Medisales Pvt. Ltd, Enrich Energy Ltd, Manikanchan Solar Park, Vikram Tea Processors Pvt Ltd, H & L Energy Solutions, Triveni Sangam Holdings & Trading Co, Saidpur Jute Co. Ltd, Daksh Infrastructure Pvt Ltd, Chaphalkar Brothers, ICC Realty (India) Pvt Ltd, Navlakha Translines, TS Wind Developers, S70 (Satara_Windmill) – Advik Renewable Energy Pvt. Ltd., CK10 (Nandurbar_Windmill) – Advik Renewable Energy Pvt. Ltd., J112 ( Dhule_Windmill) – Advik Renewable Energy Pvt. Ltd., PVSP16 ( Solapur_Solar) – Advik HI-Tech Pvt. Ltd., JM Industries, Siporex India Pvt Ltd, Medilink Services, Olam Sugar, Hemant Group, Ferromar Shipping Pvt. Ltd, Bora Agro Foods, Enrich Energy Pvt Ltd, Pooja Renewable Energy Ltd., Govindram Shobharam & Co., Saraswati Industries, H & L Energy Solutions, Navalakha Translines, TS Wind Power Developers, Persistent System Ltd, Shri Tradco India Pvt Ltd, BC Umpathy, Malpani Tea Corporation, Jathar Textiles Pvt.Ltd., Bajaj Finserv Ltd., Balkrishna Sizing Industries, M/S Bhanudas G. Raibage, Sri Amareshwara Industries, Sri Laxmi Industries, S.K Shivaraj Engineers & Infra Ventures, SK Veerabhadrappa & Co and Shivashri Techno Homes Pvt Ltd, Pragati Agencies, GMR Generation Assets, MESCOM, Power Company of Karnataka Ltd, Inox Wind, Gujarat Fluorochemicals Ltd, Hero Future Energies, Ashok Iron Works (P) Ltd, Bora Agro Foods, Rana Sugars, SISMA TN, Shri Someswara Prasad KM have requested to retain the existing forbearance price and floor price of RECs. Few of these stakeholders such as Winsol Engineers and JJ PV Solar Pvt Ltd have also sought that forbearance price and floor price.
NTPC has requested to retain the prevailing forbearance price of Rs.2400/MWh and Rs.3000/MWh for Solar and Non-Solar RECs stating that the same is comparable to solar/ non-solar (wind) tariff respectively. NHPC has requested to retain the prices of RECs at the existing level [i.e. floor price of Rs 1000/MWh and forbearance price of Rs 3000 per MWh (Non-Solar)/ Rs 2400 per MWh (Solar)] in case of RE Projects set up under REC Mechanism prior to 31.03.2020 to avoid financial losses and to secure the interest of RE Generators. Statkraft India Pvt Ltd has requested to retain the present floor price and forbearance prices for the Solar and Non-Solar RECs.
POSOCO has submitted that removal of floor price (making it zero) is a welcome move though reducing the forbearance price for both Solar & Non-solar RECs to Rs. 1000/- per MWh may result in lesser participation of RE Generators in the REC Mechanism.EX has submitted that the proposal for further reduction in forbearance price to Rs. 1000/MWh for Solar and Non-Solar RECs would restrict the interplay of market forces and may result in distorted market signals and deadweight loss.Power Exchange India Ltd. has suggested to completely remove the forbearance price and floor price from the REC mechanism and the obligated entities and suggested that RE generators should be allowed to submit their bids/offers based on the demand supply dynamics prevalent in the market.
Cement Manufacturers Association, Welspun Group, RSPL Ltd, Chemplast Sanmar Ltd, GHCL Ltd., Tata Chemicals Ltd., Atul Ltd., Ultratech Cement, Grasim Industries-Birla Cellulosic, Tamilnadu Petro products Limited, AIA Engineering Ltd, Shell Energy India, Gujarat Chamber of Commerce & Industry and Alkali Manufacturers Association of India, DCM Shriram Limited, Arcelor Mittal Nippon Steel India Ltd, Finolex Industries Ltd, Meghmani Finechem Ltd, Hazira Area Industries Association, Vedanta Ltd., Shree Cement LtdSaurashtra Chamber of Commerce & Industry and Sanghi Industries Ltd. have requested to further reduce the REC forbearance price to Rs 500 for both solar and non-solar categories.
Indo Rama synthetics, Apar Industries, Amines & Plasticizers Ltd, JSW Steel Coated Products Ltd, ONGC Uran and Pradeep Metals Ltd., Association of Power Producers (APP), FICCI, Chamber of Commerce and Industry – Kutch have suggested that there is room for further reduction of forbearance price. For Solar REC Prices, the scenario with RE price of 2017 has been considered. Instead, it was suggested that , on average, the last three year’s solar prices should be considered to arrive at the Solar REC prices.
The Commission has noted the views expressed by the stakeholders and observes that the stakeholders have submitted range of comments that – a) support the proposed floor price and forbearance price; b) request for further reduction of the forbearance price; c) suggest retention of the existing floor price and forbearance price; and d) suggest complete removal of forbearance price.
The Commission stated that the proposed floor price and forbearance price have been arrived at based on the principles specified in the REC Regulations and considering any suggestion which involves change in the provisions of the REC Regulations is beyond the scope of the present order.
The Commission has decided to reiterate that the present exercise is for the determination of forbearance price and floor price only and has also reiterated that the staff has been directed to carry out review of the REC mechanism and suggest a way forward.
Following is the final order on Floor and Forbearance price for Non-Solar RECs:
Floor and Forbearance price for Solar RECs shall be as follows:
The forbearance price and floor price as above shall be effective from 01.07.2020 and shall remain in force till 30.06.2021 or until further orders of the Commission.
The Commission has directed the Staff to undertake review of REC mechanism in the light of the prevailing market developments, including inter alia review of the need for floor and forbearance price for REC mechanism and vintage or technology multiplier.
The forbearance price and floor price decided in this order for Non-solar RECs shall be applicable to Non-solar RECs issued on or after 01.04.2017. For Non-solar RECs issued prior to 01.04.2017and the trading shall take place in accordance with Commission’s letter dated 28.05.2018.