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Renewable purchase obligations: REC trading picks up to touch record volumes

Trading of renewable energy certificates (REC) at the Indian Energy Exchange (IEX) touched an all-time high in the December session, with 32.4 lakh RECs being traded under the non-solar category. The exchange had traded 18.9 lakh RECs in November, which was the previous highest volume on record.

A little over 2.5 lakh RECs were traded in December last year. One REC, priced at Rs 1,500, is treated as equivalent to 1,000 units of green electricity.

REC trade is a market-based instrument designed to facilitate compliance of renewable purchase obligations (RPO). It aims to address the mismatch between availability of renewable energy resources in the states and the requirement of the obligated entities to meet their RPOs. Compliance to RPO targets was less than 100% across a majority of the larger states, except Andhra Pradesh, Himachal Pradesh and Karnataka in FY16.

Trading of solar RECs are currently suspended since April due to an ongoing case in the Supreme Court.

Companies with captive power generation capacities and state-owned power distribution companies (discoms) were the major buyers to purchase REC in the December trade session. According to sources, Bihar, West Bengal, Maharashtra and Delhi discoms purchased the largest number of RECs.

To achieve the target of 175 GW renewable energy capacity by FY22, the power ministry in July 2016, had issued guidelines for long-term RPO trajectory for a three-year period from FY17 to FY19.

The minimum RPO target was set at 11.50% for FY17, 14.25% in FY18 and to 17% in FY19. RPO is the share of the total energy that is to be procured from renewable energy sources.