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The International Experience:REC MechanismMohit AnandBRIDGE TO INDIANew Delhi, July 24th 2012mohit.anand@bridgetoindia.com...
Japan, Australia and UK are countries with the most  robust REC mechanisms globally  Global Overview                      ...
UK has a two year validity of Renewable ObligationCertificates (ROCs) and a penalty re-cycling mechanism                  ...
Japan has defined penalties for non-compliance, quarterlyaccounting for compliance and a carry over of obligations        ...
Australia has a differentiated non-compliance penaltyenforcement and allows re-cycling of penalties                       ...
India has separate solar specific obligations and thestates are charged with on-ground implementation                     ...
Learnings: India needs to incorporate measures to improve RPOenforcement                                              Exam...
Learnings: India should incentivise RPO compliance throughREC and increase REC window                                     ...
Learnings: India has to heighten the price stability andincrease bankability of RECs                                      ...
Thank You              01.08.2012            01.08.2012      Seite 10                           Page 10
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The International Experience: REC Mechanism

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BRIDGE TO INDIA's presentation at the MNRE Workshop on 'Challenges and issues of solar RPO compliance/RECs' on behalf of GIZ.

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The International Experience: REC Mechanism

  1. 1. The International Experience:REC MechanismMohit AnandBRIDGE TO INDIANew Delhi, July 24th 2012mohit.anand@bridgetoindia.comwww.bridgetoindia.com 01.08.2012 01.08.2012 Page 11 Seite
  2. 2. Japan, Australia and UK are countries with the most robust REC mechanisms globally Global Overview UK: Country Solar Capacity Additions till 2011 with a renewable Total number of Top 20 Countries Obligation Certificate countries with an 30000 since April 2002 RPS/Quota policies: 71 25000 Japan: Country has a New Total Number of Energy Certificate countries with a since April 2003 India: 20000 Country with tradable REC:: 6 a Renewable certificate since 2010, Apart from Ghana 15000 with a solar MW India is the only specific carve out developing country to have a 10000 Australia: Country with a tradable REC ; Renewable Ghana does not 5000 Energy Certificate have an RPS since 2000 Cumulative Capacity Addition India unlike Japan, 0 of Solar till 2011 Italy, UK and most (MW) American states Capacity addition has a solar carve of Solar in 2011 (MW) out Source: BRIDGE TO INDIA market analysis EPIA; “Global Market Outlook for Photovoltaics till 2016”; May 2012 01.08.2012 Page 22 Seite
  3. 3. UK has a two year validity of Renewable ObligationCertificates (ROCs) and a penalty re-cycling mechanism  Policy formulated in 2000 RPO obligation  15.4% RPO till 2015-16  20% renewable RPO till 2020 RPO  No solar specific targets in RPO enforcements Solar targets implementation  22GW of solar power by 2020  Implementing body: OFGEMS  Yearly penalties exist but are redistributed to Compliance compliant utilities in the proportion of their share of total ROCs bought in the country  Two ROCs for 1MWh solar produced Price  Buyout price INR3,200/ROC (£36.99/MWh)  (2010-11). REC trading Validity  2 years  Data specific to solar ROCs is unavailable Volumes  Overall 24,884,608 ROCs issued in 2010-11 Source: BRIDGE TO INDIA market analysis 01.08.2012 01.08.2012 Page 33 Seite
  4. 4. Japan has defined penalties for non-compliance, quarterlyaccounting for compliance and a carry over of obligations  Policy formulated in 2003 RPO obligation  Target to install 16TWh of renewable energy by 2016 RPO Solar targets  No solar specific targets in RPO enforcements implementation  Penalty of up to JPY1m (INR 0.7m) on interim and annual basis Compliance  There is also a quarterly compliance mechanism  20% carry over of obligation is permissible  Tradable New Energy Certificates (NEC) with a Price forbearance price of JPY11 (INR7.59) REC trading Validity  2 years Volumes  NA Source: BRIDGE TO INDIA market analysis 01.08.2012 01.08.2012 Page 44 Seite
  5. 5. Australia has a differentiated non-compliance penaltyenforcement and allows re-cycling of penalties  Policy formulated in 2000 RPO obligation  45,000GWh (or 20%) RPO till 2020 Solar targets  No solar specific targets in RPO enforcements RPO implementation  Monetary as well as civil penalties for severe non- compliance 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  Solar Credits REC multiplier of around 1.5 for Price small solar installations  INR1,378/STC1 and INR1,952/LGC2 REC trading Validity  1 Year Volumes  NA 1Small-scaletechnology 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 01.08.2012 01.08.2012 Page 55 Seite
  6. 6. India has separate solar specific obligations and thestates are charged with on-ground implementation  Policy (NAPCC) formulated in 2008 RPO obligation  15% renewable RPO till 2020 RPO implementation Solar targets  3% solar RPO till 2020  Compliance at forbearance price Compliance  States may implement further penalties  Floor price – INR 9,300/MWh Price  Forbearance price – INR 13,400/MWh  Trading price (Recent) - INR13,000/MWh REC trading Validity  1 Year Volumes  336 bids cleared on IEX Source: BRIDGE TO INDIA market analysis 01.08.2012 01.08.2012 Page 66 Seite
  7. 7. Learnings: India needs to incorporate measures to improve RPOenforcement Examples Relevance for India  Australia segregates  Enforcement measures can Differential penalties for non-compliance reflect ground realities of penalties by measuring the reasons utilities for non compliance  Obligated entities are better  The higher the risk the more place to reach full stringent is the legal action compliance in stages taken  Regulators advise on regulations to ensure better compliance  Japan has a penalty of up to  Puts a value on potential Specific Penalties costs for non compliance JPY1m (INR690,000) for non compliance  Gives certainty on  Imposed on an interim and enforcement to project annual basis investors  Improves the bankability of projects Source: BRIDGE TO INDIA market analysis 01.08.2012 01.08.2012 Page 77 Seite
  8. 8. Learnings: India should incentivise RPO compliance throughREC and increase REC window Examples Relevance for India  UK has a buy out fund  Complying entities have a Recycling where non complying potential income stream penalties entities deposit a penalty  It provides partial off set to  Complying entities can claim REC costs for utilities it after they deposit the  Provides incentives for RPO proportionate number of compliance through RECs ROCs*  Australia has a pay back mechanism of penalties charged in case of compliance for 3 years  Indian RECs have a validity  Japan’s New Energy Long term of a year Certificates and UK’s issues validity  This two year validity ROCs have a validity of 2 increases the trading years. window for developers  Mitigates risks from potential demand and supply Source: BRIDGE TO INDIA market analysis *ROC: Renewable Obligation Certificate mismatches 01.08.2012 01.08.2012 Page 88 Seite
  9. 9. Learnings: India has to heighten the price stability andincrease bankability of RECs Examples Relevance for India  All other countries with an  Long term pricing increases Long term REC mechanism are the bankability of a project in pricing developed countries the absence of a strong  They have robust market market mechanism mechanisms in place .  Japan checks the  Balances the number of Quarterly compliance of its obligated REC purchases made compliance entities on a quarterly basis through out the year  Improves the price stability of the REC  Improves cash flow available to developers Source: BRIDGE TO INDIA market analysis 01.08.2012 01.08.2012 Page 99 Seite
  10. 10. Thank You 01.08.2012 01.08.2012 Seite 10 Page 10

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