Background
India is faced with the challenge of sustaining rapid economic growth while dealing with the global threat of climate change. The country is particularly vulnerable to climate change as its economy is closely tied to natural resource-based and climate-sensitive sectors such as agriculture, water and forestry.
Recognizing this challenge, India unveiled its National Action Plan on Climate Change (NAPCC) in June 2008. The deployment of renewable energy is an integral part of this plan.
To support the growth of this sector, the government developed a system of tradable Renewable Energy Certificates (RECs) to enable the inter-state sale of electricity generated from renewable sources. The purpose of this project was to develop a framework for the implementation of the REC mechanism.
Outcomes
After its introduction the REC mechanism attracted little interest from investors, mainly because they were discouraged by the high minimum price of the RECs (set by the Central Electricity Regulatory Commission). In some cases, the certificate at this minimum price was more expensive than the power itself. Also, a Renewable Purchase Obligation, which the mechanism was meant to support, was not enforced and thus demand for renewable energy did not grow as quickly as expected. Policy makers and regulators are working on policy reforms to solve these problems.
Despite the fact that the REC mechanism did not immediately transform the renewable energy sector as anticipated, the REEEP-supported project which created the mechanism was deemed a success. As a representative of the implementing partner, the Indian Renewable Energy Development Agency (IREDA), said:
“While we would have carried out similar activities and launched the REC mechanism even without the REEEP partnership, the REEEP partnership enabled us to plan better and carry out activities much more meticulously and in wide collaboration with all stakeholders.”
In 2017, the REC Mechanism is still operational; since trading began in 2011, over 41 million Renewable Energy Certificates have been issued. The latest figures can be found here.
