REC Trading Report – May 2013

The second REC trade session of FY 2013-14 (May-13) continued to remain dry in terms of buy side participation. Clearance ratios for Non-Solar RECs remained in single digit and prices softened in Solar RECs. Following are the highlights:

Non Solar RECs

  • Market clearing prices at both exchanges remained at Floor i.e. Rs. 1500 per REC.
  • Total buy bids of 52968 (up by 19.1 % as compared to April’13 trade session) reflects small increment in buy side participation.
  • However, it may be worth to mention that this is the beginning of the compliance year and many serious buyers would ideally want to meet their compliance at the closure of the compliance year (near Q4-FY13/14).

 

 Fig 1 : REC Trading Stats – May 2013

  • High number of participants at IEX but low buy side demand reflects absence of DISCOMs and large CPPs.
 

Fig 2: Non Solar Market clearing Price  - May 2013

Solar RECs

  • Solar REC markets saw a dip in demand by 43.2 % as compared to last trading session and evidently solar REC prices came down to Rs. 10990 (PXIL) and Rs. 11490 (IEX).
  • Supply of solar RECs increased by 57% from 3077 RECs in April 2013 to 4833 RECs this month

 Fig 3: Solar REC Trade Stats – May 2013

Fig 4: Solar Market clearing price – May 2013

  • With about 150 MW Solar PV capacity already accredited, we may expect supply position to strengthen significantly going forward.

For previous months (April 2013) trade statistics click here and for relevant media articles follow the links :

Hydro Power – not renewable yet

Owing to sluggish capacity addition of hydro power projects in the country, the hydro sub group recently had recommended power ministry to declare all hydro power projects as renewable, which the later refuted.

Currently only those projects, having an installed capacity of less than 25 MW, are considered as renewable. As per the re-assessment studies carried out by central electricity authority (CEA), country’s hydro power potential is estimated at 148701 MW out of which only 34664 MW has been developed so far. Forty five (45) hydro projects having installed capacity of 10897 MW (25 MW & above) have been targeted for hydro power capacity addition during the 12thPlan, out of which 534 MW has already been commissioned till date. This slow growth of hydro power is attributed to the fact that hydro power projects have high capital costs, longer gestation periods and higher risk in implementation. Along with this inflated excise duties on steel, cement and service tax on construction services further adds to project developer’s woes.

A favourable consideration to the hydro sub group’s recommendation by the power ministry would have exacerbated the present situation of the REC market. Obligated entities would then have easily met their obligations by simply purchasing hydro power and eventually shying away from purchasing RECs from the market. This would have reduced demand of RECs further. The power ministry also refuted the rationale behind the demand for making it mandatory to buy certain percentage from hydro as RPO owing to weak implementation of RPO/REC framework.

For relevant media articles, visit the following links –

IWPA knocks GoI to reinstate Accelerated Depreciation

Indian wind power association (IWPA) has issued a press release urging Government of India to restore the benefits of Accelerated Depreciation (AD) to wind power producers, which was surprisingly withdrawn in April 2012. IWPA on behalf of small and medium industries have asserted that prior to April 2012, these industries have been setting up wind power mainly for self consumption using AD. Now that the same has been withdrawn MSME segment has submitted its inability to invest in clean energy.

In the press release, IWPA has quoted a study by CRISIL which says that annual wind mill additions in India have come down by 50 % and Govt. of India is loosing more in upfront annual tax collections.

The MSME industry has also said that the introduction of GBI by Govt. of India is not going to help the cause as the very purpose of self consumption stands defeated.

For the official press release click here.

UERC finalizes retail tariff revision for FY14

Uttarakhand has been the latest state to revise its tariff for its different category of consumers (preceded by AP, MP, HP, Karnataka and Kerala). According to media reports, the tariff revision has come as a sigh of relief given that fact that Uttarakhand Power Corporation Limited (DISCOM) had demanded and proposed for an exorbitant tariff hike. UPCL had proposed a whopping annual revenue requirement of Rs. 4834.44 crore whereas Hon’ble commission slashed the same to Rs. 3932.60 crore. Evidently, to offset the revenue gap according to the proposed ARR by UPCL, the steep hike was expected but fortunately was not to be.

The tariff hike proposed by UPCL for domestic category and industrial consumers can be seen in the table below In the table, it is worthwhile to note that fixed charges were also not kept untouched.

The tariff approved by the commission and the percentage hike effective from 1st May 2013 can be found in our analysis below:

Relevant Media coverage:

HP proposes to reduce its APPC

HP state electricity board has proposed to reduce the current APPC ( Average pooled cost of power purchase ) of Rs. 2.20 per unit to Rs. 1.98 per unit, i.e. a reduction of APPC by flat 10 %. HPSEBL while demanding a new methodology asserted there are three kinds of banking arrangements namely contra banking, forward banking and return banking that needs consideration while computing APPC for a financial year . The following are the definitions as made available in the petition by HPSEB -

Certain quantum of energy out of total purchase is banked during the year and the same quantum is received back during the same year is called contra banking.

Certain quantum of energy is borrowed from other DISCOMs during the year which is to be returned in the subsequent year is called forward banking.

Quantum of energy sold during the year under forward banking will be received back in the next year is called return banking.

HPERC in previous APPC order has considered only the forward banking purchase and did not consider the contra banking. According to HPSEBL, banking purchase by means of any kind of banking is definitely a source of power which evidently must be considered for calculation of APPC.

Such a proposal by HPSEBL to reduce the APPC is being regarded by many RE generators in the state as a negative development as it would languish the APPC + REC model.

For copy of proposal Click Here .

An Article on “Social Entrepreneurship” by Bruce

Mr. Bruce Usher, who happens to be on REConnect’s Board of Advisors has recently published an article in the prestigious ‘ Financial Times ‘. The article focuses on how social entrepreneurship is widely becoming a herald of social change and off late has been attracting young MBA graduates to indulge in something similar.

The article can be found here – ” What is the best way of innovating for Social Change?

Enjoy Reading !!

 

Power Bills to shoot up in Kerala, Karnataka and HP

After a recent power tariff hike by the states of Madhya Pradesh and Andhra Pradesh, it was now time for ERCs of Kerala, Karnataka and HP to come to the rescue of their respective DISCOMs. Time has come when poor financial condition of DISCOMs is getting passed to consumers by increased tariff rates. Kerala and Karnataka increased power tariffs with effect from 1st May 2013 whereas Himachal Pradesh put the same into effect from 1st April 2013.

In Kerala, there has been no hike in tariffs for domestic consumers (using less than 40 units in a month) and agriculture segment. Also in most cases the fixed charges have been kept untouched. For domestic consumers (using more than 40 units in a month) the average hike in tariff is to the tune of 6.94 % (considering slabs as per table below), the table below shows the slab-wise tariff for domestic consumers:

Similarly, for LT Commercial consumers with average tariff hike is 6.89% as can be seen in the table:

For LT Industrial consumers, the approved tariff is Rs. 4.7 per unit; compared to existing tariff of Rs. 4.25 per unit, i.e. an increase 10.58 % whereas for HT Industrial the percentage increase is around 12.5 % (Approved is 4.60 Rs. /unit).

In Karnataka, May 5th 2013 marked the conclusion of elections in the state and an exit poll result predicts change of government. Just after the elections the power consumers were given a power shock. The tariff was hiked by 20 paise for domestic consumers and by 25 paise for commercial consumers. A summary of the retail tariff revision by KERC was published on the website and can be accessed by clicking here.

Himachal Pradesh also revised its power tariff and the highest increase around 16 % was mandated for domestic consumer category. HPERC asserted that though average cost of power purchase per unit is almost same as last year because hydel stations are cheaper, major cost is power purchase and employee cost. Details of approved tariff are as in table below:

Category 2012-13 Tariff 2013-14 Tariff %age increase
Domestic 3.69 4.28 15.99%
Industry 4.76 5.50 15.47%
Street light 4.64 5.05 8.83%
Commercial 5.21 5.95 14.20%
Water Pumping 4.45 5.05 13.48%
Average 4.59 5.20 13.29%

Links to relevant media coverage:

RPO Status of India

Greenpeace International, in a report published recently assessed the RPO ( Renewable Purchase Obligation) status and highlighted the defaulters and leaders among Indian States.

According to the report, 20 states out of 29 states in India have defaulted for RPO compliance parameter, which has costed India by 25% in renewable power generation. The report also highlights Delhi as the worst state having inadequate regulations and policies in place for fostering RE capacity in the total energy mix of India. Maharashtra, Punjab, Andhra Pradesh and Madhya Pradesh are some other states showing shortfall against RPO targets.

Two states of the north-eastern region in India, Nagaland and Meghalaya have managed to grab a place in the top 5 along with Tamil Nadu (leader in wind power generation), Karnataka and Uttarakhand.

Greenpeace International, through this report has, has given recommendations to rich and progressing states to invest heavily in RE growth, along with establishing a uniform RPO code among various states.

 

For relevant media coverage, refer –

 

 

Status Quo for co-generators

In a key judgement pronounced by Hon’ble APTEL on 17th April 2013 condonation of delay was not granted. The issue relates to a case filed by GERC against Century Rayon/MERC for the order passed by tribunal on keeping co-generation plant of Century Rayon outside the purview of RPS obligation (generic order).

The petition was filed by GERC for review after 818 days and evidently the petition was not submitted by tribunal due to huge delay in filling a review and also on the grounds that GERC was not present in the original proceedings and hence cannot be considered as “Aggrieved Entity”.

GERC had prayed for the review because one of the co-generators in Gujarat had approached GERC on the fact that in the order passed by APTEL in favor of century rayon (vs MERC/MEDA), Hon’ble APTEL had asserted that co-generators are at par with renewable energy generators, therefore the co-generator (who knocked GERC) was requesting GERC to allow them to sell their power at preferential tariff on the above grounds.

Subsequently. in the judgement the condonation of delay for review petition filed by GERC was rejected and dismissed.

In a similar spat between UPERC and Hindalco, UPERC was forced to follow the order passed by tribunal in Century Rayon case.

It seems that the breeze, as far as the co-generation issue is concerned, will remain stagnated and a way forward can be expected only if Electricity Act incorporates appropriate amendments.

For our detailed analysis on the co-gen issue, please refer our monthly Newsletter “OPEN ACCESS Vol. 29″.

 

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