REC – Issues and Challenges

Though it is still relatively new in India but holds great promise in promoting the growth of renewable energy and a low carbon economy. Some issues and challenges which are currently observed in the Indian REC market are:

  1. Lack of long term visibility: Most Indian states have fixed RPO obligations only till 2012-13. This makes it difficult to visualized future demand and growth trajectory of the REC market and questions their bank-ability.
  2. Lack of Stricter Enforcement of RPO: There is need for stricter enforcement of state RPOs. If the obligated entities such as the distribution companies don’t take their mandatory renewable energy requirements seriously the REC market will not develop properly that will discourage RE developers who wants to take this route.
  3. Low Awareness of REC Mechanism: There is need for concerted efforts to create more awareness about RECs amongst the obligated entities so that the REC market gets developed promptly and help achieve national energy targets smoother and faster.
  4. Monthly/Quarterly RPO Compliance: RPO obligation should be complied monthly or quarterly. This will ensure smooth cash flow for both buyers and sellers.
  5. Quarterly Publication of RPO status: To ensure effective implementation of the REC mechanism, the DISCOMs and other obligated entities should be made to publish a quarterly report on the status of their renewable purchase obligations.
  6. Increase Frequency of Trading: Currently, REC trading takes place once a month in the two energy exchanges of the country, but issuance happens twice a month. Trading should be allowed twice a month immediately and may be more frequent later; it will ensure better cash flow planning.