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Blog by Team REConnect

REC Trading Report – March 2012

Today’s was the last trading session for the year before the end of the compliance period. The market expected significant demand and high prices as this was the last opportunity to comply. However, contrary to expectation demand fell sharply this month. Total demand fell by 17% over the previous month – from 389,000 to 323,700. From its peak in January demand was down 25%. Supply of RECs was down marginally (by 1%). Overall market value was Rs 58 Crores, down about 8% from February.

The market clearing price (MCP) at IEX was Rs. 2900 (February’s price was Rs.3066; a fall of 5%), whereas the MCP at PXIL the price increased to Rs 3,100 (February – Rs 3,051; increase of 1.6%).

This month a total of 2, 01,064 Non-Solar RECs were issued. 98% of these participated in the trading session today.

The demand side deserves a deeper analysis. The significant fall this month was contrary to expectations, and indicates that perhaps the market is expecting weak enforcement of RPO regulations. The focus will now shift to the regulators, who will have to determine the best way to enforce the regulations.

Overall the final trading session of this financial year was disappointing as demand fell significantly.
No Solar RECs were traded this month.

Coverage: The Hindu Business Line covered March REC trading in the article that can be accessed here. The article quotes Mr Vishal Pandya of REConnect Energy:

“The results are certainly disappointing for all the sellers and reflects the need for stronger enforcement signals,”

 

Solar success depends on enforcement of renewable purchase obligation: Gireesh Pradhan

Mr Gireesh B. Pradhan, Secretary, Ministry of New and Renewable Energy (MNRE), was overheard saying that he found himself in the “right ministry” – a fact that indicates that the Maharashtra cadre, 1977 batch IAS officer, is passionate about the growth of the renewable energy industry in India.

The Hindu Business line interviewed Mr. Pradhan at Renergy 2012, a conference-cum-exhibition event organised by the Tamilnadu Energy Development Agency (TEDA).

Following are some excerpts:

What is going to be the Government of India’s stance on encouraging local manufacturing of solar power equipment?

Encouraging domestic manufacturing is one of the objectives of the National Solar Mission. It is there in the Mission document. The way we are looking at expanding solar power, we feel that solar is going to play a very vital role in the energy scenario in the country. No country of the size of India can afford to be dependent upon only imported equipment. We would like the Indian industry to come up and supply the requirements of such a large programme.

The question is how to make it happen?

The way to make it happen is by supporting domestic manufacture — insisting on a certain amount of procurement being made from local manufacturers, (especially when) the Government is procuring. But we do not rule out anybody. You see, today those manufacturers who want to sell into India have set up large manufacturing capacities outside their home countries. Why can’t they set up manufacturing units in India? Once they come here then they are same as anybody (for local procurement).

But they seem to want more visibility on the capacities that will be put up for bidding, the project pipeline, in order to make investment decisions.

We have already declared in the National Solar Mission that we want to have 20,000 MW by 2022. We have also divided the time period into three distinct phases. Beyond this, if anybody wants (visibility at a) more micro level, it will be very difficult.

We have provided enough project visibility. After all, the potential is very large and we are not talking in terms of the macro level. I can say that at a very, very conservative estimate, the solar potential in the country is 100,000 MW.

To realise this potential —

To realise this potential, a lot depends upon the extent to which the State electricity regulators enforce the renewable purchase obligations (RPO). If there are not very strict and use the stick and there are heavy penal provisions for not fulfilling the obligations it would not be easy for public utilities to fall in line.

The framework already exists. The question is that of enforcement.

What can the Government do to ensure that the RPO obligations are enforced?

We can only persuade them. We have been persuading them. There is a Forum of Regulators. In the last three meetings of the Forum, the MNRE has participated, at very senior levels, making presentations and impressing upon them that this programme cannot go forward unless the RPO part is vigorously enforced.

Is it true that the National Solar Corporation is planning to set up a 1,000-MW solar park, for the projects in which there will be local manufacturing requirements?

We are in the process… it will not be possible for me to get into specifics, but (generally) domestic content is something that we are very keen on. We need a local manufacturing industry to develop.

We are also in favour of reduction of import duties on raw materials (for cell manufacture). We are with the industry on that.

Will Accelerated Depreciation continue?

If the Direct Taxes Code comes, then Accelerated Depreciation will go on its own. We are also taking a relook at the generated-based incentive. At present, it is 50 paise a unit.

What is the update on the National Mission on Biomass?

We are in the process of doing the Mission documents. We just got a study completed. The document will be ready maybe in 2-3 months. Both the Minister and I are keen on biomass.

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