REC Trading Report – February 2013

Non-solar RECs

Demand decreased to 153,000 RECs (down 21% from Jan 2013) this trading session. The compliance period for this financial year will end in March 2013, leaving only one more trading session to go. Given that, the overall demand remains very disappointing. As we have mentioned earlier, till stronger enforcement kicks-in, demand is likely to remain lackluster.

Over 17,42,000 RECs were bid for sale (no change from last month). The significant oversupply situation continues to persist, despite the increase in demand.

3.5 lakh RECs were not bid for sale in the trading session. This represented 17% of the total available RECs.

Prices remain at the floor price (Rs 1,500/ REC) for the seventh consecutive month. Clearing ratio on IEX was 3.3% and on PXIL was 48.7%.

Solar RECs

The situation is more cheerful in the solar REC market.

Demand reduced to 6,777 from the high of 42,000+ last month. Last month saw a significant rise in demand as the compliance year comes to a close. However, given the small capacity in the solar REC market at present, demand remains significantly higher than supply.

Supply of solar RECs was at 2,700 (down 23% from January; possibly due to lower issuances in February – in January 3,300 RECs were issued while only 1,900 were issued in February).

Price remained constant at IEX at Rs 12,500 while it increased to Rs 13,000 on PXIL.


See these results in our dynamic market tracker (Beta version)


Rajasthan Solar Tender attracts lowest bid ever

After Tamil Nadu’s Solar tender which discovered a lowest bid of Rs. 5.97 per unit (with annual escalation of 5%), it was time for Rajasthan’s solar tender to unveil something similar. Rajasthan discovered a bid of Rs. 6.45 per unit offered by Essel Mining which aims to put a 10 MW Solar PV plant. As per an article published in Business Line (refer), around four bidders were found offering solar power at rates less than Rs.7 per unit or below.

Rajasthan electricity regulatory commission in its Retail Tariff Order for FY 2012-13, fixed a tariff for HT-5 Category (Large Industrial Consumers) as Rs. 5.5 per unit. With solar power being made available at Rs. 6.45 per unit, the difference between the afore-mentioned HT tariff and that of solar-generated electricity comes out equal to less than 1. This downward trend emphasizes that the grid parity as far as solar power is concerned is within achievable distance as the cost of balance of systems and other associated solar equipments start plummeting, taking competition among solar players to the next level . Although issues like, levy of anti-dumping duty on such products jeopardizes the growth of solar power to some extent.


CERC Extends REC Validity to 730 Days

CERC in an order dated 11-Feb-2013, relaxed the provisions of regulation 10(1) of its CERC (Terms & Conditions for issuance of Renewable Energy Certificate for Renewable Energy) Regulation, 2010. Spreading an air of respite for the RE Generators, CERC extended the validity of RECs from 365 days to 730 days from the date of issuance. The Commission considered it necessary to extend the validity period of RECs in order to give opportunity and time to the RE generators to trade RECs at the Power Exchanges.

As per data furnished by the Central Agency to Hon’ble CERC, about 3071 Non-Solar RECs pertaining to three RE generators expired on 31-Dec-2013. Further, it was also noticed by the Central Agency that even though the RECs were about to expire, these RE generators did not place their bids for all the available RECs. Based on this, the Central Agency suggested that the validity of RECs may be considered to be extended to a optimum period which will provide certainty in the REC market and at the same time discourage holding of RECs by RE generators.

In the hearing held on 15-Jan-2013, comments received from 15 stakeholders (including REConnect Energy) jointly requested such an extension on the issue. REConnect submitted that – “extending validity is a temporary relief and not the solution and suggested to increase the validity of RECs for the foreseeable near future of 5 years from the date of issuance or atleast till March 2017 for which REC prices have already been determined or till the validity of registration of the RE projects. In the order, Hon’ble commission also expressed its inability to enforce RPO in the states and hoped that state regulatory commissions would enforce the RPO compliance on the obligated entities.

The order can be found here.

Wind Associations take weak RPO enforcement issue to APTEL

In the wake of the recent fear for a complete market failure of the Renewable Energy Certificate Markets in India, prominent wind power associations have knocked the doors of Appellate Tribunal for Electricity (APTEL) against various state and central electricity regulatory commissions. Indian Wind Energy Association and the Indian Wind Turbine Manufacturers Association, submitted a petition against regulatory commissions in the APTEL for weak enforcement of renewable purchase obligations (RPO), which was admitted by the APTEL.

REC mechanism which is the only scheme presently available for Wind power investors to offset their additional cost of generating green power, after withdrawal of the GBI scheme and the AD benefit has come to the verge of a total collapse. A mechanism which was proposed to encourage the growth of renewable energy in the total energy mix of the nation has failed to draw enough buyers in the recent trade sessions. January 2013 trading session witnessed a total volume cleared of mere 1,93,337 RECs leaving an inventory of 17.8 lakh RECs (for detailed REConnect’s Analysis refer).

According to an article in Business line (refer) , the petition read as – “ Such non-compliance is continuing with the silent approval of various State Commissions, at the cost of the renewable energy generators. The petitioners fear that such non-compliance, if permitted to go unchecked, may ultimately lead in the failure of the renewable energy certificate market,” With just over a month left before the current financial year coming to an end, market sentiments rely heavily on the much awaited push from the government to revive the mechanism. Read more…

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