A total of 480 million solar renewable energy credits (RECs) are expected to be traded in India by 2016, according to new analysis released by Bridge To India, a solar market consulting firm based in New Delhi, India.
The company says this prediction may come as a surprise to most industry players, as India's REC market has been largely inactive so far. The first trading of solar RECs took place in May, even though the overall REC market has been active in India since February 2011. In May, REC demand was 1,637 – far greater than a total of 149 available on the supply side.
Nonetheless, there were only five RECs traded at a price of approximately 200 euros, indicating that the selling price bid was far too high. According to Bridge To India, the enforcement of renewable purchase obligations (RPOs) remains the weak link in the REC mechanism. The Central Electricity Regulatory Commission (CERC) in India has allayed concerns to suggest that RPOs will be strictly regulated.
Further, according to the report, there is an ongoing effort by the CERC through the Forum of Regulators to convince various state electricity regulatory commissions to comply with RPO regulations. Assuming that the CERC is able to enforce RPO compliance, Bridge To India's analysis indicates that the total capacity of REC projects could be 868 MW by 2016.
Assuming that only 25% of the RPO requirements will be fulfilled through the REC mechanism, the total number of solar RECs traded is likely to reach 480 million by 2016, the report adds.