REC Trading Report – September 2012

Non-solar RECs

Prices remained at floor price this month as supply has remained far in excess of demand. The over-supply situation has persisted for the last few months – this month 7.11 lakh RECs were bid for sale (up 13% from August), while demand was for 2.64 lakh RECs (down 6.7%).

Demand has remained depressed due to enforcement concerns. As a result, the demand-supply is continuing to widen. RECs issuances have been robust but demand has been growing slowly.

Demand is a function of RPO enforcement expectations. Recent court rulings in this will help but we do not expect its effects to be visible in the market for a few months.

Cleared volume at IEX was 239,364 (Aug – 248,168; down 3.5%) and at PXIL was 25,082 (Aug – 25,725; down 2.5%)

Solar RECs

Demand decreased from last month (from 2,331 to 1,852; down 21%). On the other hand, RECs bid for sale increased significantly as more solar capacity was commissioned (1621 vs 550; up 194%). The market clearing price on IEX was Rs 12,500 and on PXIL was Rs 12,900 (last month it was Rs 12,850 on both exchanges). In total, 1,160 Solar RECs were sold (last month it was 379).

Total market value exceeded Rs 41 crore, of which Rs 1.46 crore were from Solar RECs.

The Hindu Business Line’s coverage on the REC trading quoted Vishal Pandya , Director, REConnect Energy Solutions “Not many buyers turned up for the trade session this month. Two quarters are over and we are yet to see a larger level of participation from obligated entities,”

Wind industry in Tamil Nadu gets attractive after rise in APPC

The wind industry gets more attractive after the announcement of new Average Pooled Power Cost in Tamil Nadu.There has been 7.17 % hike over the previous APPC price of Rs 2.39 per unit. The new price from now onwards will be Rs. 2.54 per unit.

In the past wind power companies have preferred either the ‘preferential tariff’ route, or the ‘captive+REC’ route over ‘APPC+REC’ route for selling their power. After the hike the APPC route will be much more attractive to pull the wind generators to prefer this route.

According to the Hindu Business Line , the industries in Tamil Nadu have welcomed the hike. K. Krishnakumar, Managing Director, Orient Green Power, said that he expected “at least Rs 2.75.”

Vishal Pandya, Director, REConnect, said that it was a “positive indication”, especially against the backdrop of the prices of RECs declining.





TNERC revises APPC for FY 2012-13

In a recent announcement by Tamil Nadu Electricity Regulatory Commission (TNERC), the average pooled power cost has been increased by 7.7% to Rs.2.54 per unit for FY 2012-13. The previous APPC was Rs.2.37 per unit. The hike in APPC price will attract the wind generators to take the APPC route.

The above rate will be applicable till further amendment by TNERC.



Discoms – the weakest link in the power chain

An article in the Business Standard provides a birds eye view of the power sector as it stands now. It reiterates the obvious – the problem is at the discom end, and is not easy to solve.

Whats interesting is that it provides a good assessment of the overall power scenario – something that is not so easy to see in the context of recent pessimism about the economy as a whole and the power sector in general. The conclusions are very interesting, and not very intuitive:

  • Most of the problems of fuel availability and cost pass through are history. The 12th plan target of adding 88,000 MW capacity seems easily achievable as about 60,000 MW is already under implementation.

” Political and administrative decisions on import-aggregation, pooled pricing and tariff pass-through, have, for all practical purposes, been taken.”

  • The recent grid-collapse aside, the transmission portion of the value chain has been well managed and required investment plans are in place
  • At the Discom level, the author identifies some factors that will affect the power sector as a whole:
  1. States are likely to move slowly to resolves issues like open access, free power to farmers, tariff increases. However, the plan for bailing out of discom’s may spur some reform: “This package for distribution companies comes with a host of conditionalities. There have to be regular tariff increases, and states will have to commit to undertake key power sector reforms, including change in the management control of loss-making distribution circles. There will be a quarterly review of distribution companies before the release of fresh funds.”
  2. State regulators will have to play a leading role in the reform of discoms
  3. Operatoinalising “open access” as envisaged by the central government will strain the discoms further in the short-term


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