Falling Short: An Evaluation of the Indian Renewable Certificate Market

This report evaluates the first year of the Indian Renewable Energy Certificate (REC) market, launched in March 2011 to help meet the National Action Policy on Climate Change target of 15% renewable electricity by 2020. The authors find that the market has failed to attract significant investment or drive cost reductions due to low participation, poor enforcement of Renewable Purchase Obligations (RPO) by states, and a lack of long-term price signals. While the conceptual design is deemed adequate in some areas, the execution is hampered by the financial instability of State Electricity Boards and a preference among developers for traditional feed-in-tariffs.

• The Indian REC market has failed to drive cost reductions in renewable energy projects because participation levels have been too low to foster competition.
• RECs have not successfully incentivized capital investment because the one-year validity of certificates is significantly shorter than the typical 20-year investment horizon of renewable energy projects, leading investors to discount them due to risk.
• The REC mechanism has not effectively integrated state-level policies into a national structure; instead, some states reduced their RPO targets after the REC launch, contributing to a nearly 15% decrease in overall national RPO targets.
• Participation in the REC market is very low: by March 2012, only 12.5% of estimated installed renewable capacity was accredited, and no solar RECs were traded in the first year.
• The financial instability of State Electricity Boards (SEBs) discourages developer participation, with aggregate SEB losses reported at USD 12.7 billion in 2009-10 and projected to reach USD 23.2 billion by 2014-15.
• The lack of long-term RPO targets at the state level undermines price signals; only 10 of 26 states with RPO targets have specified obligations for more than three years.
• While the design allows for technologically differentiated incentives, support for new renewable sources other than solar remains weak.
• Direct transaction costs for RECs are relatively low compared to mechanisms like the Clean Development Mechanism (CDM), ranging from 1% to 2.5% of revenue for a 1 MW plant at the floor/ceiling prices.
• Financial institutions do not consider RECs to be "bankable" instruments, meaning income from them cannot be relied upon for investment decisions.

APA

Shrimali, G., Tirumalachetty, S., & Nelson, D. (2012). Falling Short: An Evaluation of the Indian Renewable Certificate Market. Climate Policy Initiative. https://www.climatepolicyinitiative.org/wp-content/uploads/2012/12/Falling-Short-An-Evaluation-of-the-Indian-Renewable-Certificate-Market.pdf

Chicago

Shrimali, Gireesh, Sumala Tirumalachetty, and David Nelson. Falling Short: An Evaluation of the Indian Renewable Certificate Market. Climate Policy Initiative, 2012. https://www.climatepolicyinitiative.org/wp-content/uploads/2012/12/Falling-Short-An-Evaluation-of-the-Indian-Renewable-Certificate-Market.pdf.

Wikipedia

{{cite report |last1=Shrimali |first1=Gireesh |last2=Tirumalachetty |first2=Sumala |last3=Nelson |first3=David |title=Falling Short: An Evaluation of the Indian Renewable Certificate Market |publisher=Climate Policy Initiative |date=20 October 2012 |url=https://www.climatepolicyinitiative.org/wp-content/uploads/2012/12/Falling-Short-An-Evaluation-of-the-Indian-Renewable-Certificate-Market.pdf |access-date=17 August 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{shrimali2012falling, author = {Shrimali, Gireesh and Tirumalachetty, Sumala and Nelson, David}, title = {{Falling Short: An Evaluation of the Indian Renewable Certificate Market}}, institution = {Climate Policy Initiative}, year = {2012}, month = oct, url = {https://www.climatepolicyinitiative.org/wp-content/uploads/2012/12/Falling-Short-An-Evaluation-of-the-Indian-Renewable-Certificate-Market.pdf}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }