Also, most state discoms are bankrupt, so why would they buy these?
Sadly, no one has taken responsibility for this mechanism,” said Jasmeet Khurana, senior manager (Consulting) at market intelligence firm Bridge To India.
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Consequently, hardly 2% of total solar RECs were traded on the power exchanges in October 2014, down from 18% in April 2012, when trading started.
Experts think the REC mechanism has been in bad shape because of the rapid decline in the cost of solar power plants and states’ reluctance to meet their renewable power obligations.So far 500 MW, which is about a sixth of India’s total capacity, is commissioned under the REC mechanism, according to Bridge To India.On Monday, the energy regulator CERC proposed to revise the price of solar RECs downwards to Rs 3,500-5,800 per megawatt (MW) from Rs 9,300-13,400 per megawatt to “address the mismatch” between prevailing REC rate and solar energy prices, which have fallen over the past two years.Officials from the ministry of new and renewable energy (MNRE) have also acknowledged the failure and admit they are brainstorming on how to protect investors."We’ve been quite concerned about this and believe that RECs will not be bought much even if states enforce their renewable purchase obligations.We are aware that we need to do something to protect investors, like having a support scheme," a senior official from ministry of new and renewable energy told ET.“The main structural flaw has been the solar REC pricing, which makes the certificate more expensive than solar power itself.Small entrepreneurs, who have burnt their fingers and funds under the REC mechanism, say they thought another lucrative field of business had opened up."We thought solar was another line for start-ups and small entrepreneurs. Big companies and foreign investors will come and bid for big projects.The Guptas are among the hundreds of small investors across the country, who wished to seize solar energy as a new business opportunity, including corporate houses, with ambitions of diversifying into the energy business.REC is a market-based instrument which was introduced in 2012 to help states meet their obligations to purchase renewable energy by buying RECs from sellers on energy exchanges, IEX and PXIL.