In the USA, State Renewable Portfolio Standard (RPS)policies are a major demand driver for RECs, impacting REC prices. Generally, stateRPS policies play a major role in propping up demand for RECs by requiringutilities to generate or purchase an ever-increasing number of RECs annually toensure increasing delivery of renewable electricity to their customers. InIndia, the policy is driven in unified way by MNRE (Ministry for Non-RenewableEnergy) and RPO is the mechanism in place as already mentioned above. RPSpolicies also define which RECs are eligible to meet that demand by definingthe project types and geographic locations from which utilities must source RECsto use towards compliance. In the USA, the States have varying RPS eligibilityand compliance requirements, creating distinct state compliance markets withdifferent REC prices.
RPSs may also have special provisions targeting specificresources that further enhance the price differences between RECs meeting theprovision’s eligibility requirement and those that do not. One common specialprovision of state RPSs are “solar carve-out” policies requiring utilities togenerate or purchase RECs from in – state or in – region solar facilities. Solarcarve-outs are the main mechanism that drives up the price of solar RECs(SRECs), creating considerable price differentials between various types ofRECs. Similar to this, in India, RPOs have been majorly divided into Solar andnon-Solar RPO. The SERCs (State Electricity Regulatory Commissions) arerequired to separately give their RPO targets as mentioned. This was initiallydone to ensure offtake of solar power, given the higher tariffs 18 months ago.Also, now it assumes renewed significance in view of the 1GW target of Solar by2022 and the targets need to be revised.
The State Electricity RegulatoryCommissions (SERCs) are mandated to specify year-wise RPOs in accordance withsection 86 (1) (e) of the Electricity Act, 2003. For the financial year2017-18, the weighted average of total (solar and non-solar) RPO targets ofseventeen states is around 10.2%, considerably less than 14.25 % as recommendedby the Ministry of Power (MoP). This would translate to a total utilityrenewable energy obligation of 94,763 MUs in 2017-18 in those seventeen states.