In the USA, State Renewable Portfolio Standard (RPS)policies are a major demand driver for RECs, impacting REC prices. Generally, stateRPS policies create demand for RECs by requiring utilities to generate orpurchase an ever-increasing number of RECs annually to ensure increasingdelivery of renewable electricity to their customers. In India, the policy isdriven in unified way by MNRE (Ministry for Non-Renewable Energy) and RPO isthe mechanism in place as already mentioned above.
RPS policies also definewhich RECs are eligible to meet that demand by defining the project types andgeographic locations from which utilities must source RECs to use towardscompliance. In the USA, the States have varying RPS eligibility and compliancerequirements, creating distinct state compliance markets with different REC prices.RPSs may also have special provisions targeting specific resources that furtherenhance the price differences between RECs meeting the provision’s eligibilityrequirement and those that do not. One common special provision of state RPSs are”solar carve-out” policies requiring utilities to generate or purchase RECsfrom in – state or in – region solar facilities. Solar carve-outs are the mainmechanism that drives up the price of solar RECs (SRECs) and createconsiderable price differentials between various types of RECs. Similar tothis, in India, RPOs have been majorly divided into Solar and non-Solar RPO.The SERCs (State Electricity Regulatory Commissions) are required to separatelygive their RPO targets as mentioned. This was initially done to ensure offtakeof solar power, given the higher tariffs 18 months ago.
Also, now it assumesrenewed significance in view of the 1GW target of Solar by 2022 and the targetsneed to be revised. The State Electricity Regulatory Commissions (SERCs) aremandated to specify year-wise RPOs in accordance with section 86 (1) (e) of theElectricity Act, 2003. For the financial year 2017-18, the weighted average oftotal (solar and non-solar) RPO targets of seventeen states is around 10.2%,considerably less than 14.25 % as recommended by the Ministry of Power (MoP).
This would translate to a total utility renewable energy obligation of 94,763MUs in 2017-18 in those seventeen states.