India has crafted rules for trading of certificates aimed at rewarding producers of clean energy, a move expected to boost the share of electricity from renewable sources in one of the world's top carbon polluters.

India's power regulator has laid out regulations on renewable energy certificates (RECs), which can be bought by companies to meet statutory obligations to purchase a minimum level of renewable energy, the government said in a statement.

"This concept seeks to address the mismatch between availability of renewable energy sources and the requirement of the obligated entities to meet their renewable purchase obligation," it said.

Renewable energy accounts for barely 8 percent of India's total capacity of about 150,000 megawatts but the government aims to double green power generation to 25,000 megawatts in four years.

The rules stipulate clean energy producers either sell their electricity at a preferential tariff fixed by provincial power regulators or sell the electricity generation and environmental attributes associated with renewable power separately.

A central agency would also administer the certificates trading among renewable power generators. The value of a certificate would be equivalent to one megawatt hour of electricity.

For full details of new rules: http://cercind.gov.in/Regulations/REC_PRESS_RELEASE_2010.pdf

"It is also expected to encourage renewable energy capacity addition ... as the REC framework seeks to create a national level market for such generators to recover their cost," it said.

BOOST TO INVESTMENT

Carbon business analysts agreed.

"What it does is it gives government a tool to enforce its regulation. Those states which don't have enough natural resources to generate power could buy renewable certificates from others and meet their quota," CLSA analyst Rajesh Panjwani said.

"It will also encourage states to invest in companies or renewable capacities in states where there are renewable resources."

Ashutosh Pandey, chief executive of Emergent Ventures' carbon advisory business, said: "I feel RECs will definitely bring market-based innovations in the market to propel renewable energy development in the country".

India is one of the world's top producers of wind energy, and also generates solar energy and power from biomass. It hopes to attract about $21 billion worth of investments in renewable energy by 2012.

The country laid out in September new tariff rules for electricity from renewable energy sources, promising to provide about 19 percent pre-tax return on investment for renewable energy plants for an initial period of 10 years.

Benefits from thermal power plants, which account for about 60 precent of India's total generation, work out to about 18.4 percent, according to Indian power officials.

For details of renewable tariff norms: http://www.cercind.gov.in/Regulations/CERC_RE-Tariff-Regualtions _17_sept_09.pdf

India offers subsidised loans to companies building alternative energy power plants and provides tax breaks and tariff subsidies to encourage development of the renewables industry.