Though blessed with huge potential for Renewable Energy, all States in India are not equally gifted. While some States have very high potential, some States have very little potential.

In addition, the unit cost of RE based non-firm power is higher than the conventional power sources hence RE abundant States have no motivation to produce RE based power more than that required to satisfy the RPO mandate.

RPO refers to Renewable Purchase Obligation and is defined by the Central Electricity Regulatory Commission (CERC) as:
"Renewable Purchase Obligation means the requirement specified by the State Commissions under clause (e) of sub-section (1) of section 86 of the Act, for the obligated entity to purchase electricity from renewable energy sources."

The RPO is specified by a State Commission in terms of percentage of total annual electricity consumed by Obligated Entities. Being a mandate from State Commission, Obligated Entities would be required to either purchase electricity generated from Renewable energy sources or purchase REC in lieu of the same.

Eligible Entities would have to undergo the following process to participate in the "REC Mechanism":

• Accreditation with State Agency
• Registration with Central Agency

Obligated Entities would have to undergo the following process to participate in the "REC Mechanism":

• Registration with Central Agency

CERC has mandated that only Power Exchanges approved by CERC can undertake trading of REC. The salient features of Trading of REC through Exchanges are as below:

1. Only a registered Member or Client of the Exchange can trade RECs.
2. Trading would happen once in a month on the last Wednesday of each month.
3. Trading of two categories of RECs viz. Solar and Non-Solar, would be undertaken on the power exchanges.
4. Each category of REC would have maximum (Forbearance) and minimum (Floor) price prescribed by CERC.
5. Exchanges to match trades subject to the number of RECs being bid for sale being confirmed by the Central Agency.
6. All those Certificates that get matched would be extinguished by the Central Agency.

India started its Renewable Energy program in 1981 with the establishment of Commission for Additional Sources of Energy which was later converted into Ministry of Non-conventional

Energy sources in 1992. In the year 2006 it was renamed as Ministry of New and Renewable Energy (MNRE).

The aim of Ministry of New and Renewable Energy (MNRE), nodal Ministry of Government of India for new and renewable energy is to develop and deploy new and renewable energy supplementing the energy requirements. It is also responsible for formulating policies, implementation, development and intensifying R&D in the sector.

The technical potential of various sources in MW is shown below:

Sources	potential(in MW)
Wind	45000
Biomass	16000
Bagasse Cogeneration	3500
Small Hydro	15000
Waste Based	2700

India receives solar energy approximately 5000 trillion kWh/year equivalents which are yet to be tapped.

Relevant Acts and Regulations which have boosted Renewable Energy in India are:

1. Electricity Act 2003 (EA 2003)

   Section 86 of the EA 2003 promotes Renewable Energy by ensuring grid connectivity and sale of renewable electricity. Also creates a demand for renewable energy by requiring SERCs to specify RPOs for the distribution utilities in the State.

2. National Electricity Policy (NEP)

   Section 5.2.20 promotes private participation in renewable energy Section 5.12.1 targets the reduction in capital costs of renewable energy technologies through competition

   Section 5.12.2 states SERCs should specify appropriate tariffs to promote Renewable Energy. Also specifies percentages that progressively increase the share of electricity generated from renewable sources.

   Section 5.12.3 promotes the benefits of cogeneration.

3. National Tariff Policy

   Section 6.4 requires all SERCs to specify minimum percentages for electricity to be purchased from renewable energy sources by April 1, 2006.

4. National Action Plan for Climate Change

   National Action Plan for Climate Change (NAPCC) announced by the Hon. Prime Minister of India on June 30, 2008 envisages several measures to address global warming.

   One such measure involved increasing the share of renewable energy in the total energy consumption in the country.

   NAPCC has set the target of 5% renewable energy purchase for FY 2009-10 envisaging that such target would increase by 1% for next 10 years i.e. to constitute about 15% of the energy mix of India by 2015

   Strong policy measures and proactive regulatory framework and innovative financing instruments were seen as the key element to boost the investment in Renewable Energy in the Country.

   One such policy instrument prescribed in NAPCC is Renewable Energy Certificate (REC) mechanism which would enable large number of stakeholders to purchase renewable energy in a cost-effective manner.

Only those Renewable Energy based generators complying with the following conditions would be eligible to participate in the REC mechanism:

1. It has obtained accreditation
2. It does not have a PPA for sale at preferential tariff; and
3. It sells the electricity generated to
   • Distribution licensee of the area at a price not exceeding the pooled cost of power, or
   • To any other licensee / OA consumer or
   • Through a power exchange at market determined price

There shall be two categories of Certificates, viz:

• Solar certificates based on electricity generation from solar as renewable energy source
• Non-Solar certificates based on electricity generation from renewable energy sources other than solar

The following entities would be involved in National and State level for the REC mechanism:

The visual depiction of the institutional mechanism is given below: