Sale of renewable energy certificates declined by 61 per cent to 6.29 lakh units in July as compared to 16.18 lakh in the same month a year ago due to lower supply, according to official data. Relatively new market based instrument, Renewable Energy Certificates (RECs) holds great promise in promoting the renewable energy market development in India.

Essentially, electricity consumers who consume above a certain defined limit are obligated to purchase a fixed part of their electricity from renewable energy sources. The REC mechanism provides an alternative voluntary route to a generator to sell its electricity from renewable sources just like conventional electricity and offer the green attribute (RECs) separately to obligated entities to fulfil their RPO (defined in 7th para).

RECs unbundle the electricity component (commodity) from the green/environmental attributes of the power generated from renewable sources. 1 REC is equivalent to 1 MWh of renewable energy.

Indian Energy Exchange (IEX) and Power Exchange of India (PXIL) are the two power bourses in the country which are engaged in the trading of renewable energy certificates (RECs) and electricity. The trading of RECs is conducted on the last Wednesday of every month.

According to official data, IEX saw total trade of 4.92 lakh RECs in July as compared to 10 lakh in the same month last year. Similarly, PXIL recorded sale of 1.37 lakh RECs in the month as compared to 6.18 lakh in July 2018.

IEX data showed that the decline in the volume and increase in prices has mainly been due to continuing crunch on the inventory/supply side since March 2019.

Besides RECs, there's Renewable Purchase Obligations (RPOs), which is for power distribution companies (Discoms), captive power plants and other large electricity consumers are bound to meet them by purchasing a certain percentage of their requirements from renewable energy sources.

Under RPO, bulk purchasers like discoms, open access consumers and capacitive users are required to buy certain proportion of RECs. They can buy RECs from renewable energy producers to meet the RPO norms.

The proportion of renewable energy for utilities is fixed by the central and state electricity regulatory commissions.

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