REC Mechanism - Viability of solar projects in India
So-called “obligated entities”, who have to fulfil RPO quotas have four options. They can avoid fulfilling their obligations, in which case they could be penalized. Alternatively, they can purchase solar power from the market or generate their own solar power. The fourth option is to buy Renewable Energy Certificates (RECs) to meet the quota. Solar plant owners, who sell their power outside of preferential FiTs to the grid, generate these certificates. This offers a new type of project to solar project developers. They can find an off-take for their power under market conditions and simultaneously generate RECs.