REC Trading Report – August 2012

Prices crashed to Rs 1,500 on IEX and Rs 1,555 on PXIL; a fall of 25% and 29% respectively over last month. This price fall was driven by a significant over-supply situation – close to 6.27 lakh RECs (33% increase from July) were bid for sale while demand was 2.83 lakh (76% increase; but there’s more to the story – see below).

Demand increased this month compared to July 2012. July had witnessed a steep fall (July demand was 161,000 while in June it was 350,000). The increase this month can be attributed to renewed interest by buyers due to expectation of a price drop as the oversupply situation developed.

Despite a comeback by buyers, there as a large demand-supply gap. Supply has been robust due to multiple factors – increasing capacity in the REC mechanism (since March 2012, over 1,000 MW capacity has been added), high-wind season resulting in good generation and cumulative issuance of Maharashtra wind RECs.

At the same time, demand has remained weak due to enforcement concerns. Till date, no state has taken any concrete action towards enforcement.

Cleared volume at IEX was 248,168 (July – 147,369; up 68%) and at PXIL was 25,725 (July – 10,851; up 137%)

We expect this oversupply situation to persist, and worsen, till enforcement actions spur buyers to act.

Solar RECs

Demand decreased from last month (from 8,754 to 2,331; down 73%). RECs bid for sale remained flat (550 vs 549). The market clearing price on both power exchanges was Rs. 12,850 (Its rose from Rs.12800 last month; up 0.4%). Only 379 Solar RECs were sold (last month it was 200).

Total market value exceeded Rs 43 crore, of which Rs 48 lakhs were from Solar RECs. This is up 34% in aggregate from previous month.

For news coverage of August trading session, see here:

  • Coverage in the Hindu Business Line states: “The biggest disappointment among the renewable energy producers (who are the sellers of RECs) is that no state owned electricity distribution company has come forward to buy the certificates, although they are all ‘obligated entities’. This is due to lack of enforcement of their obligations. “Lack of participation from public Discoms and large captive power plants is the main reason behind the price crash,” said Vishal Pandya, Director, REConnect”

 

REC trade picks up speed

In yesterday’s article of the Hindustan Times , Rupa Devi Singh,Managing Director of PXIL said that the REC market is expected to grow to Rs.100 crore by the end of 2012. Currently the market size per month is around Rs. 30 crore. Till date 11.5% of the total installed capacity of renewable energy sources i.e 2,913 MW out of the total 25,409 MW has been registered with the REC scheme.

In the last two month the market has stayed low due to the mismatch in the demand supply of RECs. The only driving factor is the strict enforcement across states.

Mr.Vishal Pandya, Director ,REConnect Energy Solutions was quoted,“The demand looks uncertain going forward against the rapidly increasing supply.Despite the first quarter getting over, there is no firm development on RPO enforcement across states”.

Last month against a supply of 5lakh RECs the demand was met for only 1.6 lakh RECs almost half of that in June. As a result prices fell from Rs. 2,400 to Rs. 2,200. However the demand of Solar RECs is still in demand and were traded at Rs.12,800.

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