CERC Rejects IEX Proposal For Spot Trading Of Renewable Energy

CERC Rejects IEX Proposal For Spot Trading Of Renewable Energy

The Central Electricity Regulatory Commission (CERC) does not think that the market is ready for spot trading of renewable energy and has accordingly, rejected a proposal to this effect from the Indian Energy Exchange (IEX).

Sources said the top electricity watchdog did not find merit in IEX’s contention the mechanism will provide discom more options to meet renewable purchase obligations (RPO), encourage new capacity addition and address the uncertainties around signing of long term PPAs and cost recovery issues.

The proposed green day-ahead-market (G-DAM) was based on the existing framework in regular day-ahead-market, which is also known as spot-market in market parlance. IEX said that renewable energy traders could trade solar or wind power in regular spot market if bids in G-DAM were partially cleared. Under the scheme, renewable energy sellers would have got equivalent amount of renewable energy certificates (REC) for bids cleared in the spot market. One REC is treated as equivalent to one thousand units of green electricity.

CERC said that since there is no substantial data available which can reflect the quantity of surplus renewable power, it is not advisable to introduce this instrument in the power exchange for trading. The regulator also noted that since renewable energy is infirm and unpredictable in nature, spot trade of renewables based on forecasting will not be suitable at this stage of development of the sector in India. CERC also said that G-DAM would come in conflict with the existing products such as feed-in tariff and REC.

Renewable energy is traded through the REC mechanism in the spot market. It aims to address the mismatch between availability of renewable energy resources in the states and the requirement of the obligated entities to meet their RPO, which mandates that all electricity distribution licensees should purchase or produce a minimum specified quantity of their requirements from renewable energy sources. REC trading is supposed to take place once in a month in the exchange.

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