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How to make a Profit with your Renewable Energy Business using Renewable Energy Certificate?

31 May, 2023
Renewable energy certificate

The CERC (Terms and Conditions for RECs for Renewable Energy Generation Regulations, 2022 was issued by the CERC of India in May 2022. The CERC notified these regulations for the development of a power market from renewable energy sources in India through the issuance of renewable energy certificates (REC). The notification sets out the terms and conditions for issuing REC, a market-based instrument that certifies the bearer owns one megawatt-hour (MWh) of electricity generated from a renewable energy source. RECs will be issued for electricity generated from renewable energy sources, such as wind power,  solar power, small hydropower, biomass, biofuel, cogeneration, municipal waste, black liquor and other sources approved by MNRE. Obligated entities can use RECs to meet their renewable purchase obligations (RPOs). REC is issued to RE generators that generate 1 MW of Power into the grid. And only those units connected with the grid will be eligible for generation and issuance of REC that have a minimum 250 kW of power generation capacity.

The key provisions of the CERC (Terms and Conditions for Renewable Energy Certificates for Renewable Energy Generation) Regulations[1], 2022 are

  • The registration will be valid for 25 years, provided that the registration is granted under the REC Regulations, 2010 and deemed to have been granted registration.
  • RECs can be used by obligated entities to meet their RPO requirements.
  • RECs can also be traded on the open market.
  • The price of RECs will be determined by supply and demand.

What is a Renewable Purchase Obligation

Let’s talk about the renewable Energy (RE) market. There are 2 types of buyers: the obligated entities, like distribution companies, open access market, and industries consuming captive powers and the voluntary entities, including corporations under CSR and individuals.

RPOs requirements are imposed on entities, such as electricity distribution companies, to purchase a certain percentage of their electricity from renewable energy sources. This has been the requirement mandated by Central/State Regulatory Commission and is relevant to Distribution Licensee: power distribution companies (DISCOMs), open access consumers: ones acquiring power from power exchanges (IEX/PXIL), from traders, via bilateral agreements and so on. Under the Electricity Act 2003, SERCs fixes a minimum % of the total consumption of electricity in the area of a distribution licensee for the purchase of energy from renewable sources.In 2016, after the amendment of the Tariff Policy, the SERCs were required to reserve a minimum percentage for the purchase of solar energy such that it reaches 8% of the total energy consumption (excluding hydropower) by March 2022

Eligible Entities that can issue Renewable Energy Certificate (RECs)

There are two types of REC – Solar and Non-Solar RECs. To ensure that REC is truly green power generation, the CERC has notified regulations stating the procedures for accreditation, registration and issuance of certificates. The following entities must conform to the rules stated in the notification to be eligible for the issuance of REC.

Renewable energy generating station

A renewable energy generating station will be eligible for issuance of RE certificates if the tariff of such renewable energy generating station has not been either determined or adopted under section 62 or 63 of the Act, respectively, or the electricity generated is not sold directly or through an electricity trader or in the Power Exchange, for RPO compliance by an obligated entity. Also, the eligibility entails that such renewable energy generating station has not availed any concessional transmission charges or wheeling charges. Also, the following entities shall be eligible for the issuance of Renewable energy certificates.

 Captive generating stations based on RE sources

A captive generating station based on renewable energy sources and meeting the conditions of a renewable generating station as given above will be eligible for issuance ofCertificates: It should be noted that certificates issued to captive generating stations for self-consumption will not be eligible for sale.

Distribution licensees and Open access consumers

An obligated entity being a distribution licensee or an open access consumer, which purchases electricity from renewable energy sources in excess of their RPOs will be eligible for issuance of renewable energy certificateto the extent of purchase of such excess electricity from RE sources.

How will the Renewable energy certificatework?

The processinvolves the accreditation of eligible entities for REC registration for the issuance, exchange and redemption of Certificates. The State Agency will grant accreditation of eligible entities connected to the intra-state transmission system. For interstate transmission, the accreditation will be granted by RLDC of the region in which such eligible entities are located.

Stage 1: Accreditation with CERC

The first step is to apply for accreditation with the state agency  responsible for management renewable energy in the particular state. The requirements for accreditation vary from state to state, but you will need to provide information about your renewable energy project, its capacity and the location.

Once you have been accredited by the state agency, you can register with the national agency, which is the National Load Dispatch Centre (NLDC). The NLDC is responsible for issuing RECs to accredited renewable energy generators.

Stage 2: Generation of Renewable Energy

Once you are registered with the CERC, you can begin generating electricity from your renewable energy project. You will be issued one Renewable energy certificate for each megawatt-hour (MWh) of electricity you generate.In the REC market structure, the generator can sell the power as bundled green power or as unbundled green power as per the rates decided by the power exchange or bilateral agreement and obtain the Renewable energy certificate.

Stage 3: Application for issuance of REC

 Once you have confirmed that your plant meets the eligibility criteria, one can apply for accreditation with the concerned state agency responsible for managing renewable energy in the concerned state. You can apply to the CERC after fulfilling the requirements for accreditation, which may vary from state to state. Still, you will typically need to provide information about your renewable energy project, such as the type of project, the capacity of the project, and its location. The CERC will issue a renewable energy certificate within 60 days of receiving your application.

 You can also register with the national agency, the National Load Dispatch Centre (NLDC).

To register with the authority, you will need to submit an application and provide the following information:

  • Your name and contact details.
  • The name and address of your renewable energy project.
  • The type of renewable energy source that your project uses.
  • The capacity of your project.
  • The date on which your project was commissioned

Other Licenses and Approvals are needed for Renewable Energy relate Projects.

Different types of renewable energy businesses will require certain licences and approvals apart from the accreditation. The standard licences and documents that will be needed by the entrepreneur include

Stage 4: Sale of RECs

You can sell your Renewable energy certificate in the open market. The price of RE power varies depending on the supply and demand for RECs in the market. RE generated from any of the approved renewable technologies will fetch the same price irrespective of the source of generation. Therefore, as a power generator, you must first ensure that your plant meets the eligibility criteria set out by the Central Electricity Regulatory Commission and seek the assistance of experts in the market before starting a RE project.

Scope in Renewable Energy Generation

There will be substantial demand for renewable energy in the future. This will be due to the following.

Reduced energy costs: Renewable energy sources, such as solar and wind, are becoming increasingly affordable. Companies can save on their energy bills by shifting to renewable energy.

Improved public image: Companies using renewable energy are seen as more environmentally friendly. This can improve their public image and attract new customers.

Increased compliance with regulations: Many countries and states now require companies to reduce their carbon emissions. Companies can comply with these RE regulations and avoid fines by using renewable energy.

Access to new markets: Some countries and states offer incentives to companies using renewable energy. These incentives can help companies to expand into new markets.

Increased energy security: Renewable energy sources do not rely heavily on imported fuels, which can help improve a country’s energy security.

Reduced air pollution: Renewable energy sourcesdoes not produce any emissions, thereby improving air quality and reduce greenhouse gas emissions.

Conclusion

Renewable energy has become crucial as India has started to facefaces the challenges of climate change and energy security. Renewable energy certificates are important in India’s efforts to promote the use of renewable energy. It provides a market-based mechanism for the generation and sale of RE credits, which will help to increase the supply of power from renewable sources.RECs can not only be used by obligated entities to meet their renewable purchase obligations (RPOs) but also be used by consumers to offset their carbon emissions.The demand for Renewable energy certificates is expected to grow in the years to come, and so will the need for businesses that generate renewable energy as more and more countries and companies commit to reducing their carbon emissions. However, there are various legalities while setting up the RE plant, and the entrepreneur will need a series of licences and approvals. This is a perfect opportunity for green entrepreneurs to enter the RE segment and build a sustainable and highly profitable business.

Read our Article:How To Start A Renewable Energy Business In India?

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