1. 01.08.2012 Seite 1Page 101.08.2012
The International Experience:
REC Mechanism
Mohit Anand
BRIDGE TO INDIA
New Delhi, July 24th 2012
mohit.anand@bridgetoindia.com
www.bridgetoindia.com

2. 01.08.2012 Seite 2Page 2
0
5000
10000
15000
20000
25000
30000
SolarCapacity Additions till 2011
Top20Countries
Cumulative
CapacityAddition
ofSolartill 2011
(MW)
Capacityaddition
ofSolarin 2011
(MW)
Japan, Australia and UK are countries with the most
robust REC mechanisms globally
Source: BRIDGE TO INDIA market analysis
EPIA; “Global Market Outlook for Photovoltaics till 2016”; May 2012
Australia:
Country with a
Renewable
Energy
Certificate
since 2000
India:
Country with
a Renewable
certificate
since 2010,
with a solar
specific carve
out
Japan: Country
has a New
Energy
Certificate
since April 2003
UK: Country
with a
renewable
Obligation
Certificate
since April 2002
Global Overview
 Total number of
countries with an
RPS/Quota
policies: 71
 Total Number of
countries with a
tradable REC:: 6
 Apart from Ghana
India is the only
developing
country to have a
tradable REC ;
Ghana does not
have an RPS
 India unlike Japan,
Italy, UK and most
American states
has a solar carve
out
MW

3. 01.08.2012 Seite 3Page 3
UK has a two year validity of Renewable Obligation
Certificates (ROCs) and a penalty re-cycling mechanism
01.08.2012
REC trading
Price
 Two ROCs for 1MWh solar produced
 Buyout price INR3,200/ROC (£36.99/MWh)
 (2010-11).
Validity  2 years
Volumes
 Data specific to solar ROCs is unavailable
 Overall 24,884,608 ROCs issued in 2010-11
RPO obligation
 Policy formulated in 2000
 15.4% RPO till 2015-16
 20% renewable RPO till 2020
Solar targets
 No solar specific targets in RPO enforcements
 22GW of solar power by 2020
Compliance
 Implementing body: OFGEMS
 Yearly penalties exist but are redistributed to
compliant utilities in the proportion of their share
of total ROCs bought in the country
RPO
implementation
Source: BRIDGE TO INDIA market analysis

4. 01.08.2012 Seite 4Page 4
Japan has defined penalties for non-compliance, quarterly
accounting for compliance and a carry over of obligations
01.08.2012
REC trading
Price
 Tradable New Energy Certificates (NEC) with a
forbearance price of JPY11 (INR7.59)
Validity  2 years
Volumes  NA
RPO obligation
 Policy formulated in 2003
 Target to install 16TWh of renewable energy by
2016
Solar targets  No solar specific targets in RPO enforcements
Compliance
 Penalty of up to JPY1m (INR 0.7m) on interim
and annual basis
 There is also a quarterly compliance mechanism
 20% carry over of obligation is permissible
RPO
implementation
Source: BRIDGE TO INDIA market analysis

5. 01.08.2012 Seite 5Page 5
Australia has a differentiated non-compliance penalty
enforcement and allows re-cycling of penalties
01.08.2012
REC trading
Price
 Solar Credits REC multiplier of around 1.5 for
small solar installations
 INR1,378/STC1 and INR1,952/LGC2
Validity  1 Year
Volumes  NA
RPO obligation
 Policy formulated in 2000
 45,000GWh (or 20%) RPO till 2020
Solar targets  No solar specific targets in RPO enforcements
Compliance
 Monetary as well as civil penalties for severe non-
compliance
 Severity based on reasons for non-compliance
 Re-cycling of penalties over three years
 Carrying forward a part of penalty to the next year
RPO
implementation
1Small-scale technology certificate (STC) 2large-scale generation certificate; 1 LGC = 1MWh of renewable electricity generated above
the power station baseline; Based on BRIDGE TO INDIA market analysis

6. 01.08.2012 Seite 6Page 6
India has separate solar specific obligations and the
states are charged with on-ground implementation
01.08.2012
REC trading
Price
 Floor price – INR 9,300/MWh
 Forbearance price – INR 13,400/MWh
 Trading price (Recent) - INR13,000/MWh
Validity  1 Year
Volumes  336 bids cleared on IEX
RPO obligation
 Policy (NAPCC) formulated in 2008
 15% renewable RPO till 2020
Solar targets  3% solar RPO till 2020
Compliance
 Compliance at forbearance price
 States may implement further penalties
RPO
implementation
Source: BRIDGE TO INDIA market analysis

7. 01.08.2012 Seite 7Page 7
Learnings: India needs to incorporate measures to improve RPO
enforcement
01.08.2012
Differential
penalties
 Australia segregates
penalties for non-compliance
by measuring the reasons
for non compliance
 The higher the risk the more
stringent is the legal action
taken
 Enforcement measures can
reflect ground realities of
utilities
 Obligated entities are better
place to reach full
compliance in stages
 Regulators advise on
regulations to ensure better
compliance
Specific Penalties
 Japan has a penalty of up to
JPY1m (INR690,000) for
non compliance
 Imposed on an interim and
annual basis
 Puts a value on potential
costs for non compliance
 Gives certainty on
enforcement to project
investors
 Improves the bankability of
projects
Source: BRIDGE TO INDIA market analysis
Relevance for IndiaExamples

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Learnings: India should incentivise RPO compliance through
REC and increase REC window
01.08.2012
Recycling
penalties
 UK has a buy out fund
where non complying
entities deposit a penalty
 Complying entities can claim
it after they deposit the
proportionate number of
ROCs*
 Australia has a pay back
mechanism of penalties
charged in case of
compliance for 3 years
 Complying entities have a
potential income stream
 It provides partial off set to
REC costs for utilities
 Provides incentives for RPO
compliance through RECs
Long term
validity
 Japan’s New Energy
Certificates and UK’s issues
ROCs have a validity of 2
years.
 Indian RECs have a validity
of a year
 This two year validity
increases the trading
window for developers
 Mitigates risks from potential
demand and supply
mismatchesSource: BRIDGE TO INDIA market analysis
*ROC: Renewable Obligation Certificate
Examples Relevance for India

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Learnings: India has to heighten the price stability and
increase bankability of RECs
01.08.2012
Source: BRIDGE TO INDIA market analysis
Long term
pricing
 All other countries with an
REC mechanism are
developed countries
 They have robust market
mechanisms in place
 Long term pricing increases
the bankability of a project in
the absence of a strong
market mechanism
.
Examples Relevance for India
Quarterly
compliance
 Japan checks the
compliance of its obligated
entities on a quarterly basis
 Balances the number of
REC purchases made
through out the year
 Improves the price stability
of the REC
 Improves cash flow available
to developers

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Thank You