In a bid to develop the market in power from renewable energy sources through renewable energy certificates (“REC”), the Central Electricity Regulatory Commission (“CERC”), has notified the CERC (Terms and Conditions for Renewable Energy Certificates for Renewable Energy Generation Regulations), 2022 on May 9, 2022 (“Regulations”). The Regulations have repealed the erstwhile CERC (Terms and Conditions for Recognition and Issuance of Renewable Energy Certificate for Renewable Energy Generation), 2010 (“REC Regulations 2010”). As per the Regulations, captive generating stations based on renewable energy sources, renewable energy generating stations, distribution licensees, and open access consumers are now eligible to issue REC. Some of the key provisions of the Regulations have been set out below

A. Central Agency - The National Load Dispatch Centre (“NLDC”) has been designated as the central agency to implement the Regulations. Certain key functions of the NLDC would be to: undertake the registration of the eligible entities, develop mechanism for accounting of generation and sale in respect of REC, maintain registry of REC, undertake issuance of REC, act as repository of transactions in REC, etc.

B. Eligible Entities - As per the Regulations, the eligibility criteria for issuance of REC are limited to the following:

a) renewable energy station (both captive and non-captive), provided it meets the following requirements:

i) The tariff of such renewable energy generating station has not been either determined or adopted (under Section 62 or 63 of the Electricity Act, 2003), or the electricity generated is not sold directly or through an electricity trader or in the power exchange for renewable purchase obligation (“RPO”) compliance by an obligated entity;

ii) The renewable energy generating station has not availed any waiver of concessional transmission charges or concessional wheeling charges; and

iii) For a captive renewable energy station, the REC issued, to the extent of self-consumption will not be eligible for sale.

b) Obligated entity being a distribution licensee or an open access customer purchasing renewable energy in excess of its RPO, as determined by the concerned state commission, will be eligible for issuance of REC for the electricity purchased in excess of its RPO.

C. Accreditation - The eligible entities connected to the intra-state transmission system need to be accredited by the state agency. Similarly, accreditation of eligible entities connected to the inter-state transmission system is to be undertaken by the Regional Load Dispatch Centre in accordance with the detailed procedure issued by NLD The eligible entities already granted accreditation prior to the notification of the Regulation shall be deemed to have been accredited. Further, distribution licensee or an open access customer, qualifying as eligible entity, will deemed to be accredited for grant of registration under the Regulation.

D. Grant of Registration – Registration will be granted by NLDC only to the accredited eligible entities in accordance with the detailed procedure. The registration shall be valid for 25 (twenty-five) years from the date of grant of such registration. All registration granted under the REC Regulations 2010 shall be deemed to have been registered under the Regulations.

E. Issuance of REC - A registered entity may apply for the issuance of REC to NLDC in accordance with the detailed procedure issued by NLDC and shall be eligible for issuance of REC for the validity period of its registration.

a. The Regulation provides the following time period in which the eligible entity can apply for the issuance of REC:

i) renewable energy station (both captive and non-captive) – within 6 (six) months from corresponding generation by the entity. Further, the REC shall be issued based on the electricity generated and injected into the grid (or deemed to be injected in case of captive consumption) and duly accounted in the energy accounting system;

ii) distribution licensee or an open access consumer - within 3 (three) months from the end of a financial year, along with a certification from State Commission pertaining to the purchase of electricity from renewable energy sources in excess of its RPO (as determined by the state commission).

b. Within 15 (fifteen) days from receiving the application, NLDC should issue certificates or reject the application.

F. Exchange and Redemption of REC - The RECs are required to be exchanged through power exchanges or electricity traders (exchange through electricity traders is subject to certain conditions set out in the Regulations) in such periodicity as set out in the detailed procedure issued by NLDC. The eligible entities must inform NLDC about the number of certificates intended to be sold through electricity traders. The RECs so exchanged or used for compliance of RPO will stand redeemed and NLDC shall extinguish the said REC from the registry. The REC issued to captive renewable energy stations, shall also stand redeemed on compliance of RPO.

G. Denomination of Certificate – The Regulations stipulate that each REC will represent 1 (one) MWh of electricity generated and injected (or deemed to be injected in case of captive renewable energy station). However, a Certificate Multiplier may be determined by the CERC, based on the principles outlined in the Regulations, and the REC will be issued in multiple of such Certificate Multiplier.

a. The Certificate Multiplier for the first 3 (three) years from the date of notification of the Regulation has been set out in the Regulation as follows:

i) onshore wind and solar – 1;

ii) hydro - 1.5;

iii) municipal solid waste and non-fossil fuel-based cogeneration – 2; and

iv) for biomass and biofuel - 2.5.

b. The applicable Certificate Multiplier will be assigned to the renewable energy generating stations (captive and non-captive) commissioned after coming into force of these Regulations.

c. Once assigned to a renewable energy generating station (captive or non-captive), the certificate multiplier will remain valid for 15 (fifteen) years from the date of commissioning.

H. Pricing of Certificates - The price of certificates should be as discovered in the power exchanges or as mutually agreed between eligible entities and the electricity traders, provided that the power exchanges and the electricity traders report all transactions to NLDC, on a monthly basis. CERC has the right to give directions on being satisfied that there has been an abnormal fluctuation in price of REC, sudden volatility in the price, or sudden high or low transaction volumes of REC on a Power Exchange.

Please find attached a copy of the Regulations.

This update has been contributed by Rachika A. Sahay (Partner) and Siddhant Satapathy (Associate).

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