Supreme Court Dismisses Appeal for Stay Order on CERC’s Proposal to Revise REC Prices

The Supreme Court of India has dismissed an appeal by the Green Energy Association (GEA) seeking a stay order on the Central Electricity Regulatory Commission’s (CERC) order to reduce the floor price of renewable energy certificates (RECs) to zero.

In April, the CERC had issued a proposal for establishing forbearance (maximum) and floor (lowest) prices for RECs. It said that the market for RECs has matured and that there was no longer a need for floor prices.

Renewable energy certificates are financial instruments purchased by obligated entities like distribution companies, captive power project owners, and other power consumers to meet their renewable purchase obligation (RPO) targets. One REC certifies that the bearer owns 1 MWh of electricity generated from a renewable energy resource.

The forbearance price is derived based on the highest difference between the cost of generation of renewable energy source or tariff and the average power purchase cost (APPC) of the financial year for the respective states. The floor price is determined based on the difference between the project viability requirement and APPC determined for different renewable energy technologies across the states.


In its order, the CERC had proposed a forbearance price of ₹1,000 (~$13.16) for solar and non-solar RECs for 2020, down from 2017’s prices of ₹2,400 (~$31.59)/MWh and ₹3,000 (~$39.49) respectively. It also proposed a floor price of zero for both solar and non-solar RECs from ₹1,000(~$13.16) each previously. Until March 31, 2017,the floor price for solar RECs was ₹3,500 (~$46.07)/MWh.

As per the CERC’s proposal, forbearance prices would be down 58% and 67% for solar and non-solar RECs, respectively.

Notably, in 2018, the Supreme Court ruled that non-solar RECs issued on or after April 1, 2017, would be sold at a floor price of ₹1,000 (~$13.16)/MWh.

In its appeal, GEA said that the CERC had proposed an “illusion” that the certificates that were issued before April 1, 2017, can be sold within the previous price band of a minimum of ₹1,000 (~$13.16)/MWh and maximum of ₹2,400 (~$31.59)/MWh. It said that the CERC proposal was deceptive because once the selling price of the newer certificates is mandated to be in the new price band, any seller wanting to sell his certificates for higher will never manage to sell a single certificate as buyers will always only buy the cheaper newer certificates.

Further, it argued that the REC market is not a competitive market but a compliance market, where obligated entities buy certificates only to fulfill their renewable purchase obligations. Therefore, the minimum price is set to make renewable projects viable. While the CERC has proposed to reduce the minimum price to zero, it has proposed a maximum price of ₹1,000 (~$13.16)/MWh. So, even if the appellant gets the relief of 3.5 certificates for every one certificate owned, the generators will be forced to sell each certificate for less than ₹1,000 (~$13.16)/MWh if the CERC proceedings do not get stayed.

The company stated that if the floor price is completely removed, its request to be given 3.5 certificates for each of its certificates, even if granted, would be pointless. It also added that if the maximum price is reduced to ₹1,000 (~$13.16)/MWh, it would be put in a position of disadvantage in the market.

Further, it said that most renewable energy developers registered under the REC mechanism are located in the states of Maharashtra, Rajasthan, Gujarat, and Madhya Pradesh. All these states are severely impacted by the COVID-19 outbreak. Considering this, ample time will be spent on the restoration of business and ensuring the safety of employees. “In such a scenario, it may not be possible for the renewable energy generators to participate in the public hearing to be conducted by the CERC for the determination of REC prices. If the developers are unable to represent themselves before the CERC effectively, they will be irreparably aggrieved as any downward revision in the floor or forbearance price will cause great financial loss to them,” the appeal added.

However, the apex court dismissed the appeal for the stay order after considering all aspects of the case.

Meanwhile, there was a considerable increase in the trading of both solar and non-solar renewable energy certificates (RECs) in May 2020 compared to the last month. This increase comes as a respite even as the ongoing COVID-19 crisis and the subsequent lockdown across the country have thwarted business activities.A total of 41,469 solar RECs were traded on both the exchanges, out of which 35,793 solar RECs were traded on the Indian Energy Exchange (IEX), and 5,676 solar RECs were traded on the Power Exchange India Limited (PXIL).