Rebooting Renewable Energy Certificates for a Balanced Energy Transition in India


This study provides a comprehensive overview of India’s Renewable Energy Certificate (REC) mechanism and outlines key trends in its evolution since 2010. RECs are market instruments that allow power distribution companies (disoms) and others to meet renewable purchase obligations (RPO) without buying green power. They are expected to play a key balancing role in India’s energy transition. The study examines various challenges faced by the REC market, including an ongoing trading suspension and a demand shortfall driven by poor RPO compliance. It also lists solutions that could prepare the market for the pulls and pressures that will accompany India’s ambitious rollout of green power capacity.

Key Highlights

  • Renewable Energy Certificates are tradeable market instruments. They represent the green attributes of renewable power but not the power itself, allowing discoms and other entities to comply with renewable purchase obligations (RPOs) without purchasing green energy. 
  • Depending on the power source, RECs fall into two categories: solar and non-solar. Each REC corresponds to 1 MWh of electricity injected into the grid. 
  • India launched its REC mechanism in November 2010. REC trading began on the country’s two power exchanges – the India Energy Exchange (IEX) and the Power Exchange of India (PXIL) – in March 2011.  
  • A decade later, as many as 59.5 million RECs have been sold on both exchanges at a net value of INR 9,266 crore (USD 1.24 billion). This sizeable trade volume underscores the market’s potential to play a key balancing role in India’s renewables market, especially given the uneven distribution of RE resources.
  • RECs are single-use instruments and 99 per cent of the certificates traded have found their end use to meet RPO targets of the obligated entities.


  • REC trading was suspended in July 2020 due to a legal contestation against a Central Electricity Regulatory Commission (CERC) order that removed floor prices for both solar and non-solar RECs. It should be allowed to resume as soon as possible. 
  • As many as 5.1 million RECs have remained unsold due to poor RPO compliance across India. This represents a demand shortfall of 7 per cent.

RECs issued per financial year vs end-use

Source: CEEW-CEF analysis
  • An analysis by the CEEW-CEF showed that India's 27 RPO under-compliant states would have needed to buy an additional 67.2 million certificates in 2020 if they had chosen only to use RECs to meet their targets. For perspective, total REC issuances between 2011 and 2020 amounted to just 70.6 million.
  • An effective REC market reboot should not only focus on boosting demand but also prepare for potential supply crunches. These could occur if policymakers tighten lax regulations that currently allow defaulters to carry forward RPOs instead of meeting their targets using RECs.
  • The vast under-representation of solar power in the REC market is another area of concern. Solar projects account for only 16 per cent of all RECs issued to power generators. Discoms, the largest consumers of solar power in India, account for only 12 per cent of REC issuances. This data is in sharp contrast to the significant role that solar is expected to play in expanding India's RE capacity.

RECs issuance source vs end-use

Source: CEEW-CEF analysis
*(1) Breakup percentages for RECs purchased on exchanges are CEEW-CEF estimates based on stakeholder interactions.

Key recommendations

  • Allow REC trading to resume as soon as possible.
  • Incentivise RPO compliance and REC purchases to boost demand.
  • Look beyond RPOs for ways to expand the end-uses of RECs.
  • Promote voluntary REC purchases as a way for businesses to go green.
  • Remove out-of-date conditions for REC issuances to pre-empt supply issues.
  • Improve market flexibility to allow the participation of low-capacity projects.
  • Share lessons from India’s REC experiment to enrich global conversation on Certified Emissions Reductions (CERs).
    May 2021 | Issue Brief
    Gagan Sidhu, Saloni Jain
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