Are RECs Worth It for Indian Businesses?

A non-solar REC that cost Rs 3,900 per MWh in 2013 sold for as little as Rs 204 in April 2024, an 80% year-on-year price crash in a single trading session. For any business buying certificates to cover its renewable purchase obligation, that is remarkably good news for the budget.

Whether it is equally good news for the credibility of a company's climate claims is a separate question, and one that Indian businesses are not asking often enough. The REC market has spent over a decade oscillating between oversupply and near-collapse, and voluntary corporate buyers are increasingly using the same cheap certificates to back Scope 2 emissions claims that investors and auditors expect to hold up to scrutiny.

RECs remain the most cost-effective tool available for regulatory compliance, but they are a weak foundation for a business that wants its sustainability claims to withstand scrutiny, and the price collapse that makes them so cheap is the same dynamic that undermines their credibility.

The REC mechanism was introduced in India in 2010 to let obligated entities, distribution utilities, open access consumers and captive power plants, meet state-mandated Renewable Purchase Obligations without having to physically procure renewable power. A generator earns a REC for every MWh of renewable electricity it feeds into the grid, sells the underlying electricity separately at the regulated rate, and sells the REC itself on the Indian Energy Exchange or Power Exchange India Limited to any buyer needing to demonstrate compliance.

Prices have swung dramatically over the mechanism's history. CERC's solar REC ceiling price fell from roughly $215 per MWh in 2010-12 to under $30 per MWh by 2017-21, and traded non-solar prices that once cleared between Rs 1,500 and Rs 3,900 per MWh in the mid-2010s fell to an all-time low of Rs 204 per certificate in April 2024, an 80% year-on-year decline. Trading volumes have moved in the opposite direction, with REC volumes on IEX rising 636% year-on-year in June 2025 alone.

The same certificates now serve two different buyer populations. Obligated entities buy RECs because state RPO targets require it, often at levels below the central government's own targets and with a long history of noncompliance that analysts have flagged as a structural constraint on the market. Voluntary corporate buyers, separately, purchase RECs to support Scope 2 market-based emissions accounting under the GHG Protocol, treating the certificate as evidence of a specific claim to clean electricity regardless of where that electricity was actually consumed.

RECs are worth it for what they were originally designed to do: give obligated entities a low-cost, flexible way to meet a regulatory target, and the current price collapse only strengthens that case financially.

They are a weaker choice for a business staking its sustainability credibility on them, since the same oversupply that makes RECs cheap is the clearest evidence that a purchase is not creating the new renewable capacity a genuine climate claim implies, a gap that tightening global accounting standards are about to make harder to ignore.