REC Dilemma

The REC Dilemma (Extract from one of my post on another forum)

Govt. does not have money for a long term incentive /subsidy. I guess some state governments would come up with innovative mechanisms (remember it was Gujarat, who mobilized the whole solar sector in India through their INR15 PPA in 2010.

I agree there are legal instruments, which can be water tight, but Private off takers would shun from them. One more factor is that soon the supply is going to outstrip the demand. So, the Private off takers would have the lion share in negotiating terms of the PPA contract.

If the Govt. is not able to enforce the RPO, then REC is dead before 2017. Guess - who will risk their investments in say 2014 onward, towards a mechanism, which has no visibility beyond next 3 years. If there is no strong step by the Govt., then I strongly believe that the last REC project would be commissioned in 2013 and there would be no project 2014 on-wards. Sometimes, I got perplexed to see the nos. regarding the pricing and volume on the exchanges. Is this scenario sustainable??

Way forward is for the Govt. to link financing of REC's (or any other new mechanisms) through some out of the box RPO implementation. One more thing, we are not paying attention to the RPO obligated entities. Step into their shoes and you would find RPO is not a fair game for them. How can you penalize them when they are struggling for their own survival. Industrial growth in last 6 months have been below 2% for 3 months.