Hike in prices of renewable certificates unnerves aluminium players

REC prices have spiked by 125% over past 12 months, even as manufaturers grapple with depressed international prices, slump in domestic demand

A steep escalation in prices of renewable energy certificates (RECs) has disquieted aluminium makers who are already grappling with business headwinds like depressed international prices and slump in domestic demand.

Industry sources said there is an acute shortage of RECs in the market due to which it has become a sellers’ market. REC prices have spiked by 125 per cent over the past 12 months. For solar power, the price of RECs has soared to Rs 2.25 per Kilowatt Hour (KwH) despite tariffs of solar power averaging at Rs 2.50 per KwH since 2017-18.

“It is imperative that the reduction in prices of solar and non-solar generation equipment should be passed on to the consumer in a timely manner. Therefore, the Commission’s floor & forbearance price determination requires to be revised from time to time in this direction. It is imperative to mention that almost all RE (renewable energy) capacity (around 9 per cent) is tied up under Long Term PPAs (power purchase agreements) and the REC market mechanism is not able to fulfil the purpose for which it was envisioned”, Rahul Sharma, vice president of Aluminium Association of India (AAI) wrote to Central Electricity Regulatory Commission (CERC), the regulator for power sector.

Out of 86,759 Mw of RE installed capacity, almost 82,209 Mw is tied up in long-term PPA and mere 4,550 Mw is registered with REC registry and 628 Mw is accredited for REC registration. This has resulted in skewed market prices for RECs on Power Exchanges, which is turn has resulted in disconnect of REC prices with RE prices as visible in auction of Solar Energy Corporation of India Ltd (SECI) and NTPC Ltd. The REC demand supply gap has resulted in more than 125 per cent increase in Ssolar REC and 60 per cent increase in non-solar prices in last 12 months, putting a tremendous burden on consumers & distribution companies (discoms) complying with the said REC certificates.

The existing thermal capacity of 225,000 MW (200,000 Mw coal, 25,000 Mw gas-based capacity) capacity itself requires 120,000 Mw of RE capacity installations. This is considering 17.5 per cent Renewable Purchase Obligation (RPO) as determined by the Ministry of Power for 2019-20 and 20 per cent Plant Load Factor (PLF) of RE generation compared to 60 per cent PLF of thermal capacity).

Not only this, the industrial power consumption including that generated from thermal Captive Power Plants- CPPs (about 30,000 Mw) is obligated to purchase RE power (about 15,000 Mw), which is clearly not available in the market.