The Renewable Energy Certificate (RECs) and Perform, Achieve and Trade (PAT) schemes are India's most recent move to promote clean energy.
Renewable Energy Certificates
- The program which was launched in February 2011 allows clean energy producers to trade in Renewable Energy Certificates (REC).
- RECs can be bought by companies to meet statutory obligations to purchase a minimum level of renewable energy. One REC represents one megawatt-hour of energy generated from renewable sources, such as wind, solar or biomass, and remains valid for a year.
- A renewable energy producer will have two mutually exclusive options to sell electricity - either sell at a preferential tariff, or at normal rates and use the sale of RECs to help recoup investment costs.
- RECs are meant to be traded in power exchanges in two categories - solar and non-solar. Most of the traded projects under the scheme relate to wind power, although more solar power plants are expected to come on line because of government incentives.
- The price band for solar certificates has been fixed at $264-$374 USD per MW/h, and the band for wind and biomass certificates ranges from $33-$86 USD per unit.
- Major participants include Reliance Energy Trading Ltd, Tata Power, Manikaran Power, Shree Cement and Knowledge Infrastructure Systems Private Ltd.
- In the absence of a National Renewable Purchase Obligation (RPO), RECs operate within rules crafted by states. Out of 28 states, only 21 states have such obligations, which varies from 2% to 14% of green power.
Perform, Achieve and Trade
- PAT is a market-based mechanism aimed at improving energy efficiency levels in large polluting industries in eight sectors: aluminium, cement, chlor-alkali, fertiliser, iron and steel, pulp and paper, textiles and thermal power.
- About 563 polluting units come under the eight categories, accounting for about 54 percent of the country's energy consumption.
- Identified firms would have to achieve their energy consumption target by 2014 when trading is set to begin after a three-year roll-out period.
- The tradeable energy saving certificates are called Escerts and these are based on a target reduction from the baseline. The number of Escerts issued depends upon the amount of energy saved during a target year.
- The state-run Bureau of Energy Efficiency is setting up the overall framework for the scheme and Energy Efficiency Services Limited (EESL) will work as an implementation and monitoring agency.
- The programme, originally supposed to be launched in April 2011, has been delayed as the government and industry negotiate targets for firms.
This is an important global milestone for greenhouse gas emissions trading due to the size of the Indian market. Estimates put the market size for RECs at $1.2 USD billion and PAT market at $16 USD billion in India.
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