REC Trading Report – May 2012

Solar RECs were traded for the very first time in India in the May trading session. REConnect sold Solar RECs issued to M&B Switchgear Ltd (a company that operates a 2MW solar plant in MP). The market clearing prices on both exchanges was Rs.13,000. The total demand of Solar RECs was 1642, whereas the supply was only 249. With 17.16 MW capacity already accredited under the REC mechanism, and more in the pipeline, we expect Solar REC trading to be a regular feature going forward.

Non-solar RECs

Aggregate prices and volume increased from previous month, despite significantly higher participation by sellers (275000 RECs were bid for sale in May 2012, 107% over April 2012). This may have been a function of higher than expected prices in April.

Demand jumped significantly too – total demand was for over 365,000 RECs, up 38% from last month. The more important point here is that demand this month was higher than in March 2012, which was the end of the compliance period. For demand to be this high in the second month of the new compliance period is an important sign for the market.

Prices rose at IEX – the market clearing price was Rs. 2,402/REC (increase of 9% over April 2012) ,whereas at PXIL prices declined marginally to Rs. 2,150 /REC (reduction of 2%). Last month, prices were Rs. 2201/REC at both the exchanges.

Overall, robust demand and high prices are a good sign for renewable generators.

Trading Data:

The Hindu quoted Vishal Pandya of REConnect in an article that covered May REC trading:

“This particular session was of significant importance since we were expecting to trade the first ever Solar REC in India. It was also heartening to see the rise of Solar REC market in India as well robust demand in non-solar space. This should boost confidence level of investors for REC mechanism in both solar as well as non-solar space,” says Mr Vishal Pandya, Director, REConnect

Other press coverage for the first Solar RECs trading:

Contributed by Anuj Xess


First Solar RECs Issued to M&B Switchgear; Expected to Trade in May

M&B Switchgear Ltd, which owns and operates a 2 MW solar PV plant in MP was issued 249 Solar RECs today. This is the very first issuance of Solar RECs in India. These Solar RECs are expected to be traded in this month’s trading session on May 30.

M&B Switchgear is listed on NSE and BSE.

When traded, these Solar RECs will be the very first trades in India. Over the last year Non-solar RECs have traded in large volumes. Solar RECs are priced differently than Non-solar ones due to very different investment requirements. While the floor price of Non-solar RECs is Rs 1.5/kwh, that of Solar RECs is Rs 9.3/kwh.

Revision of Electricity Tariff in Karnataka for the year 2012-13

Karnataka Electricity Regulatory Commission (KERC) has ordered revision of electricity tariff for all the Electricity Supply Companies in the State for the Financial Year 2012-13 and will come into effect for the electricity consumed from the first meter reading date falling on or after 30th April 2012.

The average tariff increase approved by the KERC amounts to 13 paise per unit and varies across different categories of consumers.The existing tariff for Commercial and Industrial consumers across the State has been increased by 20 paise per unit.

A new HT tariff category namely HT5 is introduced for consumers availing temporary supply with a demand of 67HP or more.

Cross Subsidy Surcharge:

Cross subsidy Surcharge has been reintroduced for consumers availing Open Access. The cross subsidy payable for the year 2012-13 by different category of consumers is provided in the table below:

The reason quoted forimposing cross subsidy charges in place by the commission is due to the prevailing situation of power availability during the relevant years.The point to be noted is that Since 2009 Tariff Order, the cross subsidy charges was Zero in order to encourage open access and to incentivise the State consumers (especially industrial and commercial consumers) to purchase power from outside the State at reasonable rates.

In our view, we see this has a discouraging development for open access consumers of the State (especially Industrial & Commercial).

Fuel Cost Adjustment Charge

KERC has proposed to introduce fuel cost adjustment mechanism in order to incorporate any increase / decrease in fuel cost from time to time. The Commission had sought data of fuel variation costs from ESCOMs. After due analysis of the same, the Commission will issue a separate Order in the matter which will be effective from the current year.

Time of Day Tariff

The Commission has decided to make Time of Day Tariff compulsory for HT2(a) and HT2(b) consumers with a contract demand of 500 KVA and above with effect from 1st September 2012.

Green Tariff

Green Tariff introduced in the previous tariff order for HT Industries & HT Commercial Consumers at their option, to promote purchase of energy from Renewable Sources and toreduce carbon footprint is continued. Consumers opting for green tariff have to Pay Re. 1.00/unit over and above the normal tariff.

Encouraging Solar Energy Generation

The Commission has decided not to charge any wheeling charge on transmission / wheeling of solar energy.

Contributed by Suresh Kumar

DERC to mandate the use of Renewable Energy in Delhi by 2%

To encourage the use of renewable energy in New Delhi, DERC is ready to announce a 2% RPO for the Discoms in New Delhi. DERC is revising the domestic tariff for the financial year 2012-13 . In a recent article of the Times of India the above news was highlighted.

The Obligation will mandate the discoms to procure a mandatory power by 2% through renewable energy sources like sun, geo-thermal, municipal waste etc. Solar power mandated is 0.1 % and rest can be achieved by non-solar sources.

This RPO has been in the pipeline from few years and got delayed to due to the consumer behavior about the costs involved. This move was on the lines of the national policy which demanded for promotion of renewable energy in the state. The cost has also come down and solar energy for example is becoming competitive and has gone down from Rs 18/unit to Rs 8-9/unit.

While the Discoms said that, they are all for renewable energy but procurement of 0.1% solar energy could be a problem depending on the availability, and it should be done in phases. They have urged government to bring out a rooftop policy.

Delhi is of one of the states which do not have a RPO and there was a lot of pressure on the government to announce the RPO for discoms from the new financial year. According to CEA data, Delhi’s registered power consumption was 25,559 million KWh during FY 2010-11, based on this data Delhi will require over 485 million KWh of non-solar renewable power and over 25 million KWh of solar power to fulfill the RPO targets.

Contributed by Chetan Adhikari, Anuj Xess

MPERC rejects petition to reduce Solar RPO

In a recent petition filed by MP power trading Co.Ltd , Jabalpur requesting MPERC to waive the renewable purchase obligation targets for Solar energy for FY 2011-12 and FY 2012-13. The petitioner stated that no solar power plant has been commissioned in the State of Madhya Pradesh till date hence they are not in a position to meet its solar RPO for FY 2011-12.

The important points raised by the petitioner at the hearing:

  • They have signed PPA with three developers for purchase of 5.25 MW solar power and their commissioning was scheduled in April’12.
  • They have executed PPA with NTPC for purchase of 50 MW Solar power which will be expected to be available by December 2013
  • They have also been invited to bid for 200 MW with minimum capacity of 5MW power and request for selection (RFS) has been issued.
  • Solar RECs are not available at the power exchanges.

The commission has noted that there is a substantial delay in issue of tenders after notification of the regulations and best efforts were not made by the company to procure solar power. The commission has also stated that there was a lack of confidence on the part of the petitioner company in complying with the renewable purchase obligations.
The Commission has directed that the matter to be kept pending till the bidding of 200 MW power is completed and a definitive time frame emerges for availability of solar power.

Contributed by Chetan Adhikari, Anuj Xess

MP amends RPO regulation to include Co-gen as renewable energy

In our recent newsletter (Vol 19), we had mentioned the following:

Madhya Pradesh recently proposed an amendment to its RPO regulations. The amendment proposes to substitute “Co-generation from Renewable Sources of electricity” with the word “Co-generation” in various sections of the regulation. As a result of this change, companies that have co-gen facilities would be able to off-set their RPO against consumption from co-gen.

This amendment goes the farthest in terms of any states action in the matter so far. It provides a double benefit to co-gen plants – they are not merely exempt from RPO (as in the case of Maharashtra), but can also set-off RPO resulting from other conventional sources with cogen consumption.

This amendment was recently notified. The amendment can be accessed here.

In our view, this is a backward step in MP, as it will inhibit new RE capacity addition in the state. In contrast, Orissa regulatory has recently held that Co-gen obligations and RE obligations are distinct. Forum of Regulators has also suggested the same approach. In the 23rd meeting of FOR, held on 29th & 30th April, 2011, the following was agreed:

After discussion the members agreed with the contention that RPO should be made applicable to co-generation based captive consumers as well, in line with the spirit of Section 86(1)(e) of the Electricity Act, 2003. It was also felt that the scope of Section 86 (1)(e) is to promote Renewable and that only the non-fossil fuel based cogeneration plants should be covered under the said provision for the purpose of RPO.

Punjab roll-forwards RPO to next year

PSPCL recently petitioned the Punjab Electricity Regulatory Commission to amend its RPO from 2.4% (including 0.03% solar) to 1.65%. This is inline with the extent of RPO achieved in the state (1.67% non-solar and 0.0075% solar). The reasoning behind the request for reduction was that PSPCL suffered due to reduced RE generation (delays and closures of RE facilities), and its efforts to procure RE power from the market did not bear fruit. PEDA supported PSPCL’s petition.

The commission rejected the request [DOC file]. Instead, it allowed PSPCL to carry forward the RPO to next year. PSPCL will now have to meet the shortfall this year in addition to the current year RPO (2.9%).

In our analysis, a few things stand out in the petition:

  • PSPCL did not mention efforts to procure RECs from the market as a step it took to try and meet its RPO
  • The commission did mention it as one of the steps it can consider to meet its RPO in the current year. The order states: ” This carry forward shortfall in RPO compliance during 2011-12 to 2012-13 shall be in addition to the RPO specified in the RPO Regulations for that year, to be made good separately for non-solar and solar power as specified by the Commission, through purchase/generation of electricity from RE Projects on best efforts or in case of non-availability of such electricity, through purchase of RECs from the Power Exchange(s)”
  • It is unclear whether the waiver will also apply to open access and captive consumers. The order is specific to PSPCL, but this may open a way for a carry-forward for open access and captive consumers also

Overall, the order from the commission is in the right direction. Given the nascent stage that REC markets are in, it will be difficult to enforce full penalties due to non-compliance. However, waiver or retrospective change in RPO % would send a wrong signal to the market and obligated entities.


Record output by windmills in Tirunelveli region

Windmills in Tirunelveli region on 4th May generated about 1, 940 MW, a record production in this season. The figures were announced by Tamilnadu Generation and Distribution Corporation (TANGEDCO) officials.

They said that there were more than 5, 700 windmills with an installed power generating capacity of around 3,300 MW. Generally the wind power generation is around 200 MW to 300 MW in Tirunelveli region during normal period.

But this season (May, June, July and August), the power generation has increased to around 2, 500 MW. The wind power generation season witnessed a rise in Tirunelveli region after April 20. The maximum wind power generation of 1, 940 MW was witnessed on Friday. While on Friday morning the wind power generation was 1, 300 MW.

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