A Renewable Energy Certificate (REC) is a market-based instrument to endorse that a generator has produced a certain amount of electricity from a Renewable Energy resource.
Electricity produced from Renewable Energy sources have two distinct aspects – the electricity component and the environmental attribute of the electricity produced from a Renewable Energy source.
A Renewable Energy Certificate relates to this second component, the environmental attribute of the Renewable Energy.
RECs can be purchased from the market to meet Renewable Purchase Obligations (RPO).
REC is required in India because:
- Distribution as well as potential exploitation of RE resources is not uniform across the country.
- States with higher RE potential pay more for RE electricity since the generation of Renewable Energy is extremely capital-intensive.
- Costs of electricity generation from Renewable Energy sources are not uniform across RE technologies.
- DISCOMs are reluctant to purchase RE electricity by paying extra.
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