The REC mechanism was introduced with lot of Pomp and Show in the beginning. There was a bait for the developers to
1. Take high ROI for some years and recover the cost
2. Ready to Trade Market for immediate cash realizations
Prices were definitely attractive with floor and ceiling fixed at 9 and 12. It was definitely a profitable venture as per some of the experts.
Despite all good promises, it failed on the following fronts
1. Due to lack of strong RPO (Renewable Purchase obligations), most of the REC would be sold around year end (or end of a any other review period if RPO review durations are reduced in future). This makes the revenues from a REC backed project uneven and adds to lots of uncertainties.
2. Grid projects can only be supported by subsidy due lack of grid parity in solar till now (situation may be different beyond 2015). So, Off-grid projects (which are economically viable as of now) need to be included in REC mechanism in reasonable scenario. As of now it is absent and I am stumped why?
3. What would substitute “REC” after 2017
4. Lack of visibility of pricing beyond 2017 even if policy remains intact
It is highly likely that prices of modules will reduce further due to both market growth and technology up gradations. So the capital cost is bound to decrease by 2017, but capital cost of a developer would be the cost he incurs right now. Hence, it is unfair to developer of 2012 than someone entering in 2017.
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