Renewable Energy Certificates (RECs), also called Renewable Energy Credits, are market-based instruments that certify that the bearer owns one megawatt-hour (MWh) of electricity generated from a renewable energy resource, like wind, solar, etc. Once the power provider has fed the energy into the grid, the REC received can be sold on the open market as an energy commodity. RECs are traded in power exchange within the forbearance price and floor price determined by the Central Electricity Regulatory Commission (CERC) from time to time.

There are two categories of RECs in India:

• Solar RECs: They are issued to eligible entities for the generation of electricity based on solar power as a renewable energy source.
• Non-solar RECs: They are issued to eligible entities for the generation of electricity based on renewable energy sources other than solar power.

Significance of RECs in India:

• Promotion of stand-alone systems: Since trade in RECs does not require transmission of electricity, the additional revenue from sale of RECs could help improve the viability of the stand-alone systems being used.
• Competition in the electricity market: Separating RECs from electrical energy allows near cost-effective renewable energy to participate in the power exchange in a competitive manner.
• Alternative to meet Renewable Purchase Obligation (RPO): The REC mechanism is aimed at addressing the mismatch between availability of renewable energy resources in a state and the requirement of the obligated entities to meet the RPO.
• Enhance the reach: In usual scenarios, it may not be economical to transmit electricity from remote locations. The RECs not only promote electricity generation in such regions but also provide scope to earn revenue.
• Attract investment: The REC market would provide appropriate opportunities for development of renewable energy based electricity generation and attract investment in this regard.
• Corporate social responsibility: Tradability of RECs allows wider participation by NGOs, development agencies as well as the corporate sector, as they may purchase RECs as a part of their corporate social responsibility.

The energy mix in India is rapidly changing from fossil fuel dominance to increasing non-fossil fuel share. With an impetus on promoting renewable energy, a pan-India market-based REC mechanism was introduced and has achieved success in a short span of time.