Supreme Court order on RECs to give relief to RE players, says Icra

SC further directed REC procurers to deposit the difference between earlier price and revised price

The recent order of the Supreme Court allowing trading of renewable energy certificates (RECs) at prices prevailing before March 31 is likely to give a breather to RE players, says ICRA.

The Court has further directed the REC procurers to deposit the difference between the earlier price and the revised price announced by the Central Electricity Regulatory Commission (CERC) on March 30, 2017 with the central regulator.

Earlier, the CERC in its order dated March 30, 2017 had revised downwards the floor price of solar and non-solar RECs by 71 per cent and 33 per cent, respectively, from earlier levels of Rs 3,500 per REC and Rs 1,500 per REC respectively to Rs 1,000 per REC.

Further it did not extend the vintage multiplier for unsold REC inventory. Subsequently, the power generating companies affected by CERC order filed a petition before the Appellate Tribunal for Electricity (APTEL).

However, the APTEL declined the request for a stay order on the REC trading and the affected parties then approached the SC, which put a stay order on the REC trading by its order dated May 8, 2017.

"While the SC order provides a relief for REC-based projects, regulatory uncertainty continues to prevail till the issuance of final order by the APTEL. Further, modalities for collection of the difference between earlier and revised REC price by CERC as directed by SC are not clear," ICRA Ratings Senior Vice President and Group Head Sabyasachi Majumdar said.

As far as the demand for RECs are concerned, its expected to remain subdued, despite the SC decision, which is due to the weak compliance of renewable purchase obligation (RPO) as well as inadequate monitoring of the RPO compliance by the state nodal agencies and State Electricity Regulatory Commissions (SERCs), he said.

"As a result, the REC prices have continued to remain depressed at the floor price with significant unsold REC inventory for REC based renewable energy capacity of 4500 MW, as on April 30, 2017," Majumdar added.