Purpose of REC

  • India is abundantly gifted with a variety of renewable energy (RE) sources but, not all States are endowed with the same level.
  • While some States have a very high RE potential, other States have very little.
  • To solve this problem, the Forum of Regulators in association with Central Electricity Regulatory Commission (CERC) and the State Electricity Regulatory Commission (SERC), proposed the Renewable Energy Certificate (REC) Scheme.

Key driver for Implementation

  • The key driver for implementation of REC mechanism in India is Renewable Purchase Obligation (RPO) mandated by SERC for power utilities.
  • Electricity Act 2003 mandates SERC with the function to promote renewable energy (RE) within State.
  • Under EA 2003, the SERCs set targets for distribution companies, captive consumers and open access customers to purchase certain percentage of their total power requirement from renewable energy sources.
  • This target is termed as Renewable Purchase Obligation (RPO).
  • The entities with RPO target, which are required to purchase RE have been referred to as 'Obligated Entities'.


  • The CERC has made regulations for the development of market in power from Non-Conventional Energy Sources by introducing the REC Scheme.
  • The REC Scheme defines the REC Mechanism for the issuance of transferable and saleable credit certificates called as Renewable Energy Certificates (RECs).
  • In the proposed mechanism, one REC is to be issued to the RE generator for every one MWh electrical energy generated from renewable and fed into the grid.
  • The RE generator may sell associated RECs to any distribution company or any other obligated entity across India.
  • The purchase of RECs will be deemed as a purchase of power generated from renewable sources and accordingly will be allowed for compliance of the RPO target.
  • REC mechanism will enable Obligated Entities in any State to procure RECs from RE generator in any of the States in India and surrender the same to satisfy its RPO target.

Types if REC

  • There are two categories of RECs, viz., solar RECs and non-solar RECs.
  • Solar RECs are issued to eligible entities for generation of electricity based on solar as renewable energy source.
  • Non-solar RECs are issued to eligible entities for generation of electricity based on renewable energy sources other than solar.

Source of Revenue

  • Revenue for a RE generator under REC scheme includes revenue from the sale of electricity component of RE generation
  • The revenue from the sale of environmental attributes in the form of RECs.


A generating company engaged in generation of electricity from renewable energy sources shall be eligible for participation under REC scheme if it fulfils the following conditions:

  • It does not have any power purchase agreement to sell electricity at a preferential tariff determined by the Appropriate Commission; and
  • It sells the electricity generated either
    • To the distribution licensee of the area in which the eligible entity is located, at a price not exceeding the pooled cost of power purchase of such distribution licensee, or
    • To any other licensee or to an open access consumer at a mutually agreed price, or through power exchange at market determined price