CERC Amends REC Regulations To Boost Renewable Compliance And Introduce VPPA Framework In India

The Central Electricity Regulatory Commission (CERC) has issued the First Amendment to the Renewable Energy Certificate (REC) regulations, bringing important changes to how renewable energy generation and consumption are tracked and credited in India. These updated rules will come into effect once they are published in the Official Gazette and are aimed at aligning the REC framework with evolving clean energy policies and market practices.

One of the key updates is the introduction of the terms “Designated Consumers” and “Renewable Consumption Obligations” (RCO). These additions are aligned with the provisions of the Energy Conservation Act, ensuring that large energy-consuming entities are required to meet specific non-fossil fuel consumption targets. This step is expected to strengthen accountability among industries and support India’s broader clean energy goals.

Another important development is the formal recognition of Virtual Power Purchase Agreements (VPPA). This allows companies to purchase renewable energy credits without being directly connected to a renewable power plant. The move is seen as a significant step toward modernizing corporate renewable procurement, enabling more businesses to participate in the clean energy transition while maintaining operational flexibility.

The amendment also provides clarity on the Certificate Multiplier system, which determines the number of RECs issued based on the type of renewable energy source. For projects commissioned between December 5, 2022, and the notification of this amendment in 2026, a transitional multiplier structure will apply. Under this system, solar and onshore wind projects will receive a multiplier of 1, hydro projects will receive 1.5, and biomass or biofuel projects will receive the highest multiplier of 2.5. Once assigned, this multiplier will remain valid for a period of 15 years from the project’s commissioning date, offering long-term certainty to developers.

For projects commissioned after the amendment comes into force, CERC has introduced a more detailed formula to determine certificate value. This new system is based on three key factors: the tariff range of the project, which carries a weight of 40 percent, the maturity of the technology at 30 percent, and the project’s contribution to grid stability or peak demand support, also at 30 percent. Under this revised framework, offshore wind projects have been assigned a high multiplier of 4.0 due to their higher costs and early-stage development. Technologies such as pumped hydro storage, battery energy storage systems (BESS) charged by renewable sources, and large hydro projects will receive a multiplier of 3.0, while solar and onshore wind will remain at 1.0.

The amendment also clearly defines how RECs will be managed under VPPAs. Certificates generated under such agreements will be automatically transferred to the consumer purchasing the renewable attribute. These consumers can then use the certificates to meet their Renewable Purchase Obligations (RPO) or RCO targets. Once the certificates are used for compliance, they will be extinguished by a central agency to avoid double counting. While unused certificates can be carried forward to future years, they cannot be traded in the market once they have been transferred under a VPPA.

In addition, the amendment introduces stricter timelines for REC applications. Distribution companies and open-access consumers must now apply for certificates within three months of receiving certification from their respective State Commission regarding surplus renewable energy procurement. Any application submitted after this deadline will not be considered eligible, ensuring greater efficiency and discipline in the REC process.

Overall, the new amendment is expected to improve transparency, encourage diverse renewable technologies, and strengthen India’s renewable energy compliance framework.