PPA under REC Mechanism – unit prices

Posted on March 16, 2011 by

Essential concept of the REC mechanism is the split of the electricity revenue for a renewable energy producer into a “pure” electricity component and the environmental commodity, the REC.

The RE producer will therefore have to sign a Power Purchase Agreement (PPA) with the distribution or transmission utility at the “average pooled purchase cost” (APPC) for that state. This number is defined as the “weighted average pooled price at which the distribution licensee has purchased the electricity including cost of self generation, if any, in the previous year from all the energy suppliers long-term and short-term, but excluding those based on renewable energy sources, as the case may be.”.

Given the highly variable mix of power generation for various states, this number is a range – from Rs. 1.21 per kWh to Rs 3.40 per kWh. The APPCs for a few select states as under

Andhra Pradesh    – Rs 1.78/kWh
Maharashtra    – Rs 2.43/kWh
Karnataka    – Rs 1.85/kWh
Kerala        – Rs 1.46/kWh
Tamilnadu    – Rs 2.62/kWh
Gujarat        – Rs 2.21/kWh
Rajasthan    – Rs 2.48/kWh

Under this framework, the RECs have to ‘compensate’ (or more than that!) for the difference between the APPC and the preferential tariff that would otherwise be applicable to the RE generator. This is going to lead to differing price expectations by generators across different states (even if from even the same technology class). First round of trading of RECs would clarify lot of the price discovery for RECs.

For the process of Accreditation of RECs, Read Renewable Energy Certificates – Accreditation
For the process of Registration of RECs, Read Renewable Energy Certificates – Registration

For services in REC, visit “Renewable Energy Certificates

Know your RPO here