Renewable Energy Credit (REC) Price Forecast

Renewable Energy Credit
(REC) Price Forecast

UNCERTAINTY IN THE ELECTRICAL GRID
• In today's electrical grid, as the integration of renewable energy sources (RES)
in the grid increases, the uncertainty in the available generation also rises. In
particular, the larger the share of RES in the grid, the more dependent is the
electricity generation on weather conditions, and in turn, the more
unpredictable electricity generation becomes. This uncertainty also affects the
demand side as electricity consumption is also weather-dependent and every
kWh produced must be consumed somewhere.
• In this context, in order to cope with the uncertainty in the production and
demand of electricity, forecasting has become a key component in several
applications, e.g. reserve activation, electricity trading, operational planning,
switching sources, programming backup, short-term power trading, peak load
matching, scheduling of power systems, congestion management, etc.
What is a REC and why is it needed?
• RECs are the market instrument used to represent the renewable energy attributes
associated with renewable electricity generation – one REC represents the generation of
one MWh of qualifying renewable electricity. Utilities purchase and surrender RECs to
demonstrate compliance with RPS requirements, which is verified by regulators.
• Interest in renewable energy has increased worldwide in response to concerns about
greenhouse gas (GHG) emissions, other environmental issues such as nitrogen oxides,
particulate matter and other regional air emissions, energy security and economic
development.
• Many countries have established mandatory Renewable Portfolio Standards (RPS) to
require certain electricity utilities to include renewable energy in their energy supply mix.
These requirements have created a market for the clean or renewable energy attributes
associated with renewable energy generation.
WHAT DO WE NEED TO FORECAST?
I) ELECTRICITY DEMAND
From the point of view of a transmission system operator, knowing the demand of electricity is
paramount for scheduling power systems, purchasing reserves, congestion management, and ensuring
that cost are minimized while the demand of electricity is ensured (even though failures in the system
might happen). Similarly, utility companies might also benefit from electricity demand forecasting in
several ways, e.g. operational planning.
II) ELECTRICITY PRICES
In recent years, together with the increasing integration of RES, the volatility of electricity prices has also
surged. In this context, accurate forecasting of electricity prices is of paramount importance to utility
companies for successfully trading electricity, scheduling and planning processes, and programming
backups.
III) SOLAR/WIND GENERATION
Among the RES that are weather dependent and in turn uncertain, wind and solar sources represent the
largest share in the energy mix. In particular, wind and solar-based generation respectively represent the
second and third largest share of RES, only below hydro power which is much less weather-dependent
and less uncertain.
Electricity Demand
trends in India
• During the fiscal year 2017-18, the utility energy availability was
1,205 billion KWh with a short fall of requirement by 8 billion
KWh (-0.7%) against 1230 billion KWh anticipated. The peak load
met was 160,752 MW with a short fall of requirement by 3,314
MW (-2%) against 169,130 MW anticipated.
• Nearly 0.28% of households (0.6 million) have no access to
electricity in India. The International Energy Agency estimates
India will add between 600 GW to 1,200 GW of additional new
power generation capacity before 2050.
• India's renewable energy sector is amongst the world's most
active players in renewable energy use, especially solar and wind
electricity generation. As of 31 March 2018, India had grid
connected installed capacity of about 69.02 GW non-
conventional renewable technologies-based electricity capacity
and conventional renewable power or major hydroelectric
power capacity of 45.29 MW. The total renewable power
generation capacity as of 31 March 2018 was 114.31 GW.
References
1. Forecasting in the electrical grid
2. REC forecast and Pricing
3. Electricity Sector in India
4. https://ieeexplore.ieee.org/document/7972173

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