The Central Electricity Regulatory Commission (CERC) may not attempt a downward revision of the price band for renewable energy certificate (REC) trading, as it had proposed earlier.
According to official sources, the commission is contemplating having a long-term price band, instead of continuing with the short-control period of three years.
Under the existing regulations on rates, the price band set down in 2010 would remain for three years (control period) before it is revised. The discussions for a revision begin a year before the deadline.
At present, the price band comprises a floor price of Rs 1,500 per mega watt (Mw) and forbearance price of Rs 3,900 per Mw for non-solar power. For solar power, where generation cost is much higher than non-solar variants like hydel and wind energy, the floor and forbearance price is Rs 12,000-17,000 per Mw, respectively.
The CERC had issued an order to revise the price bands downwards in June this year. Accordingly, the price band was set to be lowered to Rs 1,400-3,480 (per Mw) for non-solar and Rs 9,880-13,690 per Mw for solar energy.
The decision of not lowering the price follows a meeting of renewable energy (RE) generators in July. RE generators have appealed to CERC for a status quo on the pricing mechanism. They said a revision in price could create uncertainty for project developers on the expected return. The move could also affect investment inflows into renewable energy projects — solar, wind and water power, said industry sources. More so, because the renewable energy trading mechanism on power exchanges was at a nascent stage. To make REC trading more effective on exchanges, the CERC proposed to spread renewable power purchase obligations of states in a staggered manner over one year and at specified intervals.
Officials said it will be mandatory for states to take five per cent of their annual power requirement from renewable resources, called the renewable power purchase obligation.
The official, said because states usually buy power at the end of every financial year, the first session of renewable energy certificate (REC) trading in March-end witnessed 424 non-solar RECs trading at a clearing price of Rs 3,900 per REC. In contrast, the second trading session in April saw only 150 RECs trading at Rs 1,500 each. Under the proposal, states might have to buy the mandatory five per cent of power from renewable sources in four tranches and might not have a choice of their own.