REC Trading Report – February 2012

Traded volume exceeded 2 lakh RECs for the first time. Total volume traded was over 206,000 (vs. 171,000 in January; an increase of 20%). The total traded value exceeded Rs 63 crore (21% increase over previous month).

The market clearing price (MCP) at IEX was Rs. 3066 (previous month – Rs.3051; an increase of 0.5%), whereas the MCP at PXIL remained as it was in the last month i.e at Rs. 3051.

Demand growth was below expectations. Total demand fell by 10% vs last month (to 389,000 from 432,500 last month). The market has expected a robust growth in demand as there is only one trading session left before the end of the first effective compliance period.

On the other hand the supply increased by more than 20 % from January’s trade session. Over 234,000 RECs were bid for sale, representing 97.5% of the total available in the market. This is a significant jump from the past 3 month average of 86%. High pricing along with expectation to possible fall in prices after March is probably driving such a high participation.

The high participation by seller, low growth in demand and marginal increase in prices indicates that the market has peaked in terms of pricing. Since March will be the last trading session, a jump in demand is expected. However, there will be pressure on sellers too, as prices are expected to drop in April (next compliance will be a year away).

No Solar RECs were traded this month.

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Numeric Power’s solar power plant received REC accreditation

Chennai-based Numeric Power Systems has received REC accreditation for one of its two 1 MW solar PV plants in Tamil Nadu.The plant is likely to feed energy to the grid from next month.

This is the third solar power plant in the country (and the first in Tamil Nadu) to get REC accreditation. The other two are: Jain Irrigation (8.5 MW) in Maharashtra and M&B Switchgear (2 MW) in Madhya Pradesh.

The total solar capacity put under the REC scheme stands at 11.5 MW today. In an article of the Hindu Business Line Vishal Pandya said , “These plants will generate between 18,000 and 20,000 RECs in a full year. The ‘solar RECs’ will trade between Rs 9,300 and Rs 13,400 – the floor and ceiling prices fixed by the Central Electricity Regulatory Commission.”

The solar capacity under REC is very less for the obligated entities to fully meet their purchase obligations. It is estimated that the requirement would be in the upwards of 800 MW.

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CERC allays fears over RPO enforcement

In a recent article of the Hindu Business line , Central Electricity Regulatory Commission (CERC) shared their concern over Renewable Purchase Obligation ( RPO ) enforcement. After successful completion of REC mechanism for one year, RPO enforcement regulation across various states are very clear now. If any electricity distribution company is in default, then the State nodal agency will ask it to deposit a sum into an account as penalty, failing which the matter will go to the respective State electricity regulatory commission.

The above issue has been the biggest fear for solar developers who can’t find any obligated entity ready to fulfill their obligation through solar RECs. Dr. Pramod Deo, Chairman, CERC said regarding the enforcement of RPO regulations , “is like asking whether the police would enforce the law.”


Vishal Pandya
was quoted in the above article “Demand for solar REC will be very much there because supply is still very (much) short of the demand,”.

Till date only 15 MW of solar capacity has been added for REC benefits and the demand will be in the upwards of 800 MW next year.

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Delhi’s solar policy scrapped

Delhi Government’s solar mission seems to be in darkness. The roof-top solar policy under which consumers would set up solar panels on their roof-tops and feed extra power generated into the main grid got scrapped.They felt the scheme could be exploited on several grounds, a major violation being production of power through cheaper means and selling it to discoms at higher rates.

In an article of Times of India, Mr.Gopal Saxena, CEO, BSES Rajdhani said, “We are ready to start a 1 MW project using the roof-tops of the discom’s buildings. However, with the change in government policy we are stuck. If Delhi Electricity Regulatory Board announces the renewable power obligation for discoms this year, we will have to source our obligatory solar power from other states since there is not enough land mass available in Delhi to set up a big solar project,”.

Let’s wait and watch for the Delhi government to bring a new solar policy.

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Bruce Usher and Prof. Khaparde join REConnect Energy’s Board of Advisors

We are pleased to announce that Prof. S. A. Khaparde and Bruce Usher have agreed to join the Board of Advisors of REConnect Energy.

Prof. Khaparde and Bruce Usher are eminent personalities in their field. Their detailed profiles are included below.

The Board of Advisors will play a key role in strategic guidance and support to REConnect. We are certain that we will be able to draw on their diverse and rich experience to provide better service to our clients.

Bruce Usher

Bruce Usher is co-director of the Social Enterprise Program and an executive-in-residence at Columbia Business School, where he has been an adjunct professor in finance since 2002, teaching the Carbon Finance and the Finance & Sustainability courses. The objective of both courses is to utilize financial tools to create sustainable value for society.

From 2002 to 2009, Professor Usher was CEO of EcoSecurities Group plc, during which time he built it into the world’s largest public carbon credit company. EcoSecurities structures and guides greenhouse gas emission reduction projects through the Kyoto Protocol, acting as principal intermediary between the projects and the buyers of carbon credits. Professor Usher led EcoSecurities through an IPO, a secondary public placement and strategic investment, and the sale of the entire company to JP Morgan in December 2009. EcoSecurities developed more than 400 projects in 36 countries, representing approximately 10 percent of all projects approved by the United Nations under the Kyoto Protocol.

Prior to EcoSecurities, Usher was co-founder and CEO of TreasuryConnect LLC, which provided electronic trading solutions to banks and was sold to eSpeed Inc in 2001. For the previous six years, he was COO of The Williams Capital Group, a boutique institutional investment bank. Prior to that, he worked in financial services in New York and Tokyo. He is on the boards of E+Co, a nonprofit that finances clean energy entrepreneurs in developing countries, and Community Energy Inc., a renewable energy project development company.

He earned an MBA with distinction from Harvard Business School.

 

Prof. SA Khaparde

Prof. Khaparde is at the Department of Electrical Engineering at IIT Bombay. His detailed profile is available here

Current Research Areas

  1. Transmission Pricing
  2. Distributed Generation and MicroGrids
  3. Transmission System Expansion Planning
  4. Financial Transmission Rights
  5. Intelligent Power Grid
  6. Smart Power Grid

Background

  • Academic : Received Ph.D. in Electrical Engineering in 1981 from IIT Kharagpur.
  • Experience : Joined Department of Electrical Engineering IIT Bombay as faculty in November 1978.

Responsibilities held

  • Prof. Khaparde was Chairman of the technical committee for “International Conference on Power Systems 2004 – ICPS2004” held at Kathmandu, Nepal, in November 2004.
  • He organized and chaired a panel session on, “Power Reforms and Restructuring in Developing Countries” at the IEEE Power Engineering Society General Meeting 2004, Denver, Colorado, USA.
  • He delivered a tutorial on “Availability Based Tariff and its Implementation” at National Power Systems Conference (NPSC) 2004, Chennai, India.
  • Prof. Khaparde was the Convener for the 15th National Power Systems Conference, held in December 2008 in Department of Electrical Engineering, IIT Bombay.
  • Prof. Khaparde has been invited by the Bureau of Indian Standards (BIS) to be the Convener of a group comprising 15 organizations from industry and academics for developing a standard Common Information Model (CIM) for standardization of Data Exchange amongst Control Centers in emerging Power Sector Scenario in India. This is a one year exercise that has started in March 2010.

Visiting Faculty Positons

  • Prof. Khaparde has been awarded by the European Commission with Erasmus Mundas scholarship EMIN 2008/2010 for research at Pontificia Comillas University, Madrid, Spain.
  • He was visiting faculty in June and July 2008 at University of Western Ontario, London, Canada.

Books Written

  1. S. A. Soman, S. A. Khaparde, and Shubha Pandit, “Computational methods for large sparse power system analysis:An object oriented approach” Published by Kluwer academic Publishers,Jan 2002, ISBN 0-7923-7591-2
  2. S. V. Kulkarni and S. A. Khaparde, “Transformer Engineering Design & Practice,” Published by Marcel Dekker Inc., New York, 2004, ISBN: 0-8247-5653-3. http://www.crcpress.com/shopping_cart/products/product_detail.asp?sku=DK1232
  3. S. A. Khaparde, Contributed a chapter on, “Integration of wind power into the grid” in the book , “Wind Power Development in India,” edited by G. M. Pillai. World Institute of Sustainable Energy (WISE), Pune, India, 2006. ISBN 81-902925-0-1.
  4. S A Khaparde, and A R Abhyankar, Contributed a chapter on, “Transmission Loss Allocation Methodologies” in the book entitled “Grid Security and Management” edited by P. K. Shetty and V. K. Agrawal, PowerLine publishers, New Delhi, India, 2009.

A small article on the above announcement was mentioned on the Hindu Business Line

Open Access Faces Hurdles from Discoms in Rajasthan

Recently, all the Discom’s in Rajasthan simultaneously came out with circulars with changes to the open access mechanism. The pretext of making these changes was the recent letter from the Law Ministry on Open Access. As an example, the key changes made by the circular of the Ajmer Discom (See Comml. AJ-484) are mentioned below:

  • Those consumers that draw power from the Discom’s only in an emergency will be levied temporary tariff (50% higher than the normal applicable tariff)
  • They will have to inform the Discom’s 48 hours in advance of the intent to draw such power
  • The Discom will have no obligation to supply power to them
  • Those consumers that draw power from both the Discom and other sources will also have the 48 hour prior intimation requirement. Also, once the decide to draw power from a source other than the discom, they will have to do so for the entire 24 hour period. They will also have additional surcharges during peak hours.
  • To top it all, the Ajmer Discom gave 4 days to the industry to choose which option they would like to go with

These changes will obviously make the open access proposition a non-starter. The 48 hour prior notice requirement is a big hindrance. At the same time the 24 hour block provision will make the purchase of power from power exchanges un-viable. The higher tariff’s will hurt too.

To be fair to the Discom’s, the need for prior intimation is well appreciated – it will enable them to plan their power procurement better. However, there are better way to achieve that. As in every other case, its the intent of the Discom’s that wrong here as well. As a detailed article in the Business Standard recently mentioned, the requirement to have the Discom the supplier of last resort will be critical in making open access a reality.

As for the circulars, RERC has put a stay on them for the time being, after several industries applied for relief.

KERC announces APPC for FY-12

Honorable Karnataka Electricity Regulatory Commission (KERC) recently announced the Average Power Purchase Cost (APPC) for Karnataka. The APPC announced by KERC for the financial year 2012 is Rs.2.73/unit.

Earlier, one of the key amendments to the RPO regulations in Karnataka was the inclusion of he definition of the APPC price. It is defined in the Karnataka 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‘.

 

See APPC news from other states here:

 

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Will Open Access system remain open ?

Open access system allows generating companies to sell power directly to distribution companies and bulk consumers of 1MW and above is going to be implemented soon. The ministry of power has instructed states to implement the open-access system of Electricity Act, 2003.

The question is whether it will remain open or not. There are lots of issues that need to be considered before open access system creates an open market in the power sector. Issues like availability of power on demand and negotiation of prices are major concerns for the system to be implemented smoothly.It took eight years to actually get started when the ministry of power sent its November 30 letter titled “Opinion from M/o. Law and Justice on the operationalisation of open access in power sector”, to all electricity regulatory commissions, state governments and the state power utilities.

The two major points mentioned in the letter is :

  1. That consumers with demand exceeding one megawatt (Mw) are perforce required to draw supplies from sources other than their local distribution company.
  2. Even if these consumers do continue to draw electricity from the local distribution company (discom), the rates must be negotiated between the two and, therefore, the state electricity regulatory commissions must cease to determine the retail energy tariffs by restricting themselves to determining only the wheeling charges and cross-subsidy surcharge.

In an article on the Business Standard the current scenario of the open access system in the Indian Power market is highlighted.

If the open access market opens it will reform the Indian power market where the generators could take investment decisions based on demand, without relying on power utilities or the State Government.

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