Review of REC Trading-June 2011

Compared to REC Trading for last month, this month saw a larger level of participation from buyers in REC market. For example, in this trade session, IEX witnessed 72,002 RECs* from buy side whereas, PXIL saw demand of 10,000 RECs. There are few interesting cues that this trade session has revealed. These are summarized below.

  1. Out of 41,005 RECs issued, only 24,514 (60%) RECs participated in this trade session (IEX+PXIL). Poor price realization in last two trade session could have been the reason for this.
  2. Of 24,514 RECs that were available for sale (IEX+PXIL), only 16,385 (67%) RECs got sold that too in a situation when total buy bids for RECs were 82,002 (almost 3.5 times)!! This clearly reflects that REC sellers are now expecting better revenue realization from RECs and want to experiment the power of banking facility in REC.



Possibilities for next trade session?

  • Market has started gaining momentum.
  • With regulatory talks on quarterly compliance and stricter enforcements of RPOs across India, seller’s expectation
    may rise and would naturally try to bank RECs if good REC prices are not realized.
  • On the other hand, the current REC prices are still running at the bottom. This would attract more and more buyers who would like avail the this opportunity to meet their compliance at reasonably lower costs.
  • These counter forces would eventually drive the market to a more ‘perfect market’ with higher liquidity and efficient price discovery.
  • All said and done, if market continues to progress this way along with constant regulatory ‘push’, we could see REC market soon coming out this phase of incubation
  • * – At present only Non-Solar RECs are available in the market. No Solar RECs have been issued so far. Hence, word REC shall be understood as Non-Solar REC unless explicitly specified.

    Order on APPC of HPSEB Ltd for FY 2011-12

    The revised Pooled Cost of Power Purchase has been worked out as Rs. 2.24 per unit for the FY 2011-12. The order on APPC of HPSEB Ltd for FY 2011-12 is available here.

    States Need to do More to Provide Open Access

    Planning Commission deputy chairman, Montek Singh Ahluvalia has said “states need to make all-out efforts to expedite reforms in power distribution and do more to provide open access”.

    His comments were were made meeting with Western region states which was part of the meeting to develop the 12th five-year plan. Similar comments were made by CERC Chaiman, Dr Pramod Deo in an interview published recently. According to the article Ahluwalia painted a bleak picture of the power sector, especially distribution saying that the mounting losses (to the tune of Rs 65,000 crore) were a matter of concern.

    We have regularly highlighted the need to reform distribution and provide open access – this will be a critical reform for the REC markets to succeed and for a significant amount of renewable energy capacity to get added in the country. It is encouraging to see that the issue of open access has visibility at the highest level, and one can hope that steps will be taken to resolve this at the earliest.

    Pramod Deo, Chairman, CERC Talks About Open Access and the State of Electricity Markets

    The Business Standard published a very interesting interview of Pramod Deo, Chairman, CERC today.

    The highlights of what he said are:

    • There are several difficulties in implementing Open Access at the intra-state level
    • Discoms have been very slow to give open access due to high industrial tariffs (see our previous post on Maharashtra, which highlights the issue; as an update, despite the Supreme Court’s refusal to stay Open Access, there is no progress on the matter)
    • Discom’s losses are high, and increasing – current estimate is Rs 60,000 crore. One of the reasons is the lack of rate revisions in a regular and disciplined manner.
    • Satisfactory progress on Renewable Energy Certificate markets

    You can read the full interview here.

    PSERC notifies final regulation on RPO

    Honorable Punjab State Electricity Regulatory Commission (PSERC) notified final regulation on Renewable Purchase Obligation and its compliance. PSERC specified the RPO percentage of 2.37% (Non Solar – 2.34 % and Solar – 0.03 %) for current financial year 2011-2012.

    The regulation has also specified that renewable energy being received, if any, by the obligated entity from its own generating station(s) and being consumed in its area of distribution, shall be accounted for fulfillment of its renewable purchase obligation.

    The final regulation is available here.

    CERC to determine Floor & Forbearance Price of RECs post 2012

    Central Electricity Regulatory Commission (CERC) has come out with a suo-motu order on determining new Floor and Forbearance price for REC (Solar & Non-Solar) for the period post 2012. The draft copy of the order and a notice for the public is available here.

    CERC’s proposal is shown below :

    Non Solar REC ( Rs/MWh) Solar REC ( Rs/MWh)
    Forbearance Price 3480 13690
    Floor Price 1400 9880

    Comments/Suggestions on the draft proposal are invited by 05th July, 2011 and public hearing will be held on 14th July, 2011.

    KERC Proposes Amendments to RPO Regulations

    KERC has notified First Amendment to KERC (Procurement of Energy from Renewable Resources) Regulations on May 30th 2011. The draft of the proposed amendment is available in www.kerc.org. The highlights of the amendment are:

    1. RPO obligation is on captive plant or plants which are grid connected only .Hence non grid connected captive plants are free from RPO obligation in Karnataka state.
    2. The obligation of distribution licensees to purchase electricity from solar energy may be fulfilled by purchase of solar REC’s only. In case of non-availability of Solar REC’s in a particular year ,then in such cases the same obligation can be fulfilled by purchase of other renewable sources of energy or non-solar REC’s.
    3. Pooled cost of purchase has been clearly defined in the amendment which was missing in the regulation as-
      Pooled cost of Purchase means ‘the weighted average pooled price at which the distribution licensee has purchased the electricity including cost of self generation if any, in the previous year from all the energy suppliers, but excluding those based on liquid fuel, short term purchases and renewable energy sources‘. 

      KERC has invited written comments/views/suggestions on the proposed amendment latest by June 21.06.2011 from interested parties.

      - Contributed by Jyothi B

    TNERC Proposes Amendment to RPO Regulation

    The TNERC notified the draft amendment to the Renewable Purchase Obligation Regulation on 19th May, 2011. The draft resembles the CERC regulations except for few minor changes. The key highlights of the draft regulations are,

    1. Captive & Open Access Consumers have been included under the purview of an Obligated Entity.
    2. The RPO of the state of Tamil Nadu has been brought down from 14% to 10% with a solar obligation of 0.15% for the year 2011 – 2012.
    3. The non solar RPO has been notified as the same for the next three years till 2014, whereas the solar RPO will remain at 0.25% for the year ending 2013 & 2014.
    4. Consumption met through Non – Grid connected Captive Generating Plants will not be considered for RPO purpose.
    5. CPPs will not be eligible for a period of three years if they choose to forego on their own, the benefits of Concessional Wheeling charges, banking facility benefit and waiver of Electricity Duty.

    The Commission has invited Comments/Suggestions on the Draft Amendment on or before 20th June, 2006.

    The final regulation, notified earlier, can be downloaded here.

    - Contributed by V. Rajesh

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