REC Trading Report – April 2013

Non Solar RECs

As April is the first month of the compliance year FY 13-14 a low demand situation was expected in this month’s trading session. Out of 18.9 lakh RECs which were put for sale only 44,459 RECs were purchased by the obligated entities.The about 93% of the total available RECs participated in the trade session.

The market clearing price was Rs.1500/REC at both IEX and PXIL which will remain the same in the coming months also as long as the oversupply situation will continue to prevail.

Solar RECs

The demand of solar RECs was higher than the supply. Buy bid was 3,522 and the sell bid was 3,077 out of which 2,217 got redeemed. The number of solar projects is continuously increasing under the REC scheme which provide a good amount solar RECs in the coming months.

The price at IEX was Rs.12, 206/REC and at PXIL it was Rs.12, 000/REC.

For information on previous months trading, please visit -March 2013 Trading Report

 

 

 

Karnataka APPC to remain the same till June 2013

KERC issued a gazetted notification dated 02.04.2013, in which it has notified that the pooled cost of power purchase as determined vide its notification dated 27.06.2012 as Rs. 2.60 per unit will remain in effect till 30th June 2013.

The notification says that – “for the purpose of Renewable Energy Certificates (REC), the Karnataka Electricity Regulatory Commission hereby continues the pooled cost at Rs. 2.60/unit till 30th June 2013 or further notification, whichever is earlier.” The Commission has proposed this as an interim measure since it would take some time before power purchase cost for FY13 is finalized.

KERC asserted that the variation in pooled cost based on actual power purchase cost of FY13 shall be adjusted in the future bills accordingly.

First amendment to Chhattisgarh’s REC RPO regulations

Chhattisgarh State Electricity Regulatory Commission (CSERC) recently brought an amendment to their RPO –REC regulations . The amendment mainly highlights the issue raised by obligated entities where there is an excess purchase of renewable energy/renewable energy certificates. They have requested the commission as there is an uncertainty in consumption pattern of captive users as there has been lower consumption than the anticipated consumption. The commission has agreed to the varying nature of captive consumption. Keeping this in mind, the commission has asked that in case of excess purchase/ shortfall of renewable energy or renewable energy certificates the obligated entities can meet their RPO in the succeeding year. The last proviso of Regulation 9.1 is proposed as :

“Provided any excess purchase/ shortfall of renewable energy or the REC procured by obligated entities for meeting the RPO in the obligation period shall be considered for meeting the RPO for the succeeding year.”

The commission has also proposed that the amended regulations will be called as “Chhattisgarh State Electricity Regulatory Commission (Renewable Purchase Obligation and REC framework Implementation) (First Amendment) Regulations, 2013” and shall be in force for the period of applicability of the principal regulations (CSERC RPO-REC Regulations 2011).

REConnect also participated in providing comments to the commission on the proposed amendment. In our opinion the ‘excess purchase/shortfall’ term will allow the obligated entity to carry forward its shortfall to the next year. We have requested the commission to allow carry forward the obligation to some extent only else the obligated entities will enjoy a longer compliance period which will which will affect the REC market and the revenue of renewable energy generators in the state. The carry forward should be allowed to obligated entities only if they show genuine interest in purchasing RECs and there is non availability of RECs in the market.

The REC market itself is in a bad situation from the past few months where RE generators could sell only a few fraction of their RECs. This situation was also highlighted by the Honourable CERC in its recent suo-moto petition for extending the validity of RECs. In the petition, CERC noted:

“Needless to say, the main reason for lapsing of RECs is the reluctance and / or apathy on part of distribution licensees to come forward to buy the RECs to meet their RPO”

We feel that the proposed amendment by CSERC is will affect the RPO compliance status of captive users in the state as it will allow them to easily carry forward their shortfall of RE power/ RECs.

The order can be found here.

 

MP introduces new tariff for wind and bagasse based cogen plants

Hon’ble MPERC recently unveiled its wind tariff order 2013 for procurement of power from wind energy generators. For new wind projects commissioned after 26.03.2013, the tariff has been set as Rs. 5.92 per unit. The commission has considered Rs. 596 lakhs per MW (including cost of power evacuation) and capacity utilization factor of 20% for tariff determination. Other important parameters considered are as under:


MPERC’s previous wind tariff order available dates back in the year 2010 when a tariff of Rs. 4.35 per unit was finalised. This implies that there has been increase of 36.09 % in this year’s tariff. The distribution company in whose area the energy is consumed has been ordered to deduct 2 % of the energy injected towards wheeling charges for third party sale/captive consumption.

Given the fact that Govt. of India has considered reintroduction of Generation Based Incentive for WEGs in its Budget for FY14, the wind power generation business in the state seems lucrative. The APPC + REC module, on the contrary, has limited encouragement for WEGs wanting to participate in the REC Markets considering the fact that RECs have been trading at floor prices (see March 2013 Trading Report) and the APPC in the state is around Rs. 2.47 per unit. This sums up the net realization for WEGs to be around 3.97 Rs per unit which is indeed 33% less than what preferential tariff has to offer.

MPERC also came up with new tariff for bagasse based cogeneration plants in Madhya Pradesh. The tariff for new plants to be commissioned on or after 01.04.2013 has been determined as Rs. 6.28 per unit for a project life of 20 years.

The important parameters considered for tariff determination are provided in the table below:

Andhra Pradesh, Madhya Pradesh hike Industrial Tariffs

The retail tariff order for FY 2013-14, rolled out by Hon’able APERC, has brought a major setback for the industries of the state. The hike in tariff was quite significant as it implies that industries dependent on grid power will receive inflated power bills. Evidently, this steep hike has also attracted much of agitation in the form of protests from various organizations.

The tariffs have been hiked for all categories, low tension domestic, commercial and high tension industrial consumers. Industries connected to 33 kV HT line will now be paying 21.2 % more i.e. Rs. 5.30 per unit as compared to Rs. 4.37 per unit for previous fiscal (FY 2012-13). The upward movement of tariff can be seen in the table below:

Though the retail tariff order may seem outrageous to many, in our opinion it is going to be a big push for solar captives in the state, based on the fact that it would just improve the economics as far as having an in-house solar captive power plant is concerned. An attractive solar policy with many incentives on offer in the state of Andhra Pradesh also backs up this assertion to a greater extent.

MPERC also increased tariff for industrial consumers by 3.9 % which though is not as steep as that mandated by APERC, but just goes to show how various states device methods to rescue their cash-strapped DISCOMs.

The APERC retail tariff order for FY 2013-14 can be found here.

Relevant media coverage on the issue can be found in the following links –

Karnataka extends banking facility to Solar Projects

Hon’ble KERC has come up with an order dated 22nd March 2013 for introduction of banking facility to Solar Power Projects in Karnataka. KERC had previously invited comments /suggestions on the issue latest by 25th October 2012.

The Commission has asserted that solar power indeed is infirm in nature and is therefore comparable to those of mini-hydel and wind. In view of the same, the commission has agreed and extended banking facility, with banking charges of 2%, to solar projects on the same terms and conditions as prevalent and applicable to mini hydel and wind generators.

MESCOM and CESC though had a contradictory opinion on the same. CESC submitted that since it has not met its RPO it is not in favour of the motion, while MESCOM feared that it will not be able to meet its RPO as generators will then opt for Open Access. Moreover extending banking along with free wheeling will burden these DISCOMs further.

Referring to an order of Hon’ble ATE dated 22.01.2009, KERC avers that Solar Power Generators will have to bear the difference between the UI charges prevalent at the time of injection and UI charges prevalent at the time of drawal of power along with fixed banking charges of 2%.

Wheeling charges as of now is zero for solar projects and KERC ordered that the same would continue until further notifications.

In our opinion, since zero wheeling charges will be regarded as promotional, solar generators will have to face some glitches as far as their eligibility to explore the REC Market is concerned. Also since solar generators may now favour opting open access, to offset their renewable purchase obligations DISCOMs will inevitably have to buy RECs from the market rather than signing PPA’s with solar generators.

The order can be found here.

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