Punjab pushes PSPCL for RPO compliance by December’13

Punjab state power corporation limited (PSPCL) has been asked to comply with its stipulated RPO target for FY12, FY13 and FY14 cumulatively. In an order dated 12 August 2013, Punjab regulator allowed PSPCL to carry forward 114.80 non solar MUs and 25.8 solar MUs to FY14, which is the cumulative shortfall for FY12 and FY13.

For the current fiscal (FY14), the Punjab Discom has to purchase around 400,000 RECs and the shortfall of 114800 will eventually entail over 500,000 RECs to be purchased by end of December 2013.

in MUs Shortfall (+/-) in MWh RECs required
Non Solar Obligation 114.8 114800 114800
Solar Obligation 25.8 25800 25800
  140.6 140600 140600

With Maharashtra and Delhi also pushing for RPO on similar lines, it is expected that the buy side participation  will improve in the  poorly performing REC market.

For the copy of the order – Click Here

REC Trading Report – August 2013

Market continued to perform poorly as prices remained at floor for both non solar and solar RECs. There were major pronouncements this month on the RPO front which includes  one of the most industrialized like Maharashtra, coming with a stern compliance order by the end of Fy14. Owing to these developments, market performance is expected to improve but only in the last quarters i.e. Q3 and Q4 of FY14. REC inventory closed with 3187508.

Non Solar RECs

For non solar credits, the clearing volumes, as compared to previous trading session (REC Trading Report – July 2013) plunged by 56% and 89 % at IEX and PXIL respectively. As evident in the chart below, the supply continued to grow.

 Fig 1: Non Solar REC Trade Stats – August 2013

 Fig 2 : Non Solar REC Market Clearing Price – August 2013

Solar RECs

As compared to July 2013, clearing volumes  at both exchanges increased by a modest 16.2 %.  Supply almost doubled at IEX as total supply in the market breached 30000 mark.

 Fig 3: Solar REC Trade Stats – August 2013

 Prices at both exchanges was 9300 per solar REC.

Fig 4 : Solar REC Market Clearing Price – August 2013

Delhi discoms build RPO compliance costs into their tariff

According to the most recent tariff orders, the Delhi Electricity Regulatory Commission (DERC) has allowed Tata Power Delhi Distribution Limited, BSES Yamuna Power Limited, BSES Rajdhani Power Limited, New Delhi Municipal Council to incorporate the cost of Renewable Purchase Obligation (RPO) for FY2013-14 in their tariff.

The details of their obligation are given below:

in MWh Tata Power BSES Yamuna BSES Rajdhani NDMC Total
Non Solar Obligation 342190 255070 454710 61956 1113926
Solar Obligation 14880 11090 19770 2964 48704

We see this as a good starting point. By including in its tariff order, a Discom’s is essentially starting to recover the cost of RPO as part of the tariff it charges. This should pave the way for RPO compliance (like in the case of Punjab). However, it is too early to count compliance by Delhi Discom’s as a certainty. Eventually, DERC will have to enforce compliance. We will come to know of that after March 2014. In the tariff order, the Discom’s and DERC are silent regarding the extent of compliance in 2012-13.

GERC waives RPO shortfall; second year of non-compliance

In a very disappointing order, the Gujarat State Electricity Commission (GERC) decided to waive off the shortfall in RPO for the year 2012-13. In a petition filed by the Discoms, they had asked for a waiver on the grounds that not enough RE capacity was commissioned in the state and even from those commissioned, several developers opted for the REC mechanism. GERC interpreted CERC’s REC regulations to apply mainly to non-RE resource states.

Its order states:

“From the above [reading of the CERC regulations], it transpires that the REC was introduced for the fulfillment of RPO for the States who are not having geographical conditions which is suited for RE generations and due to which they are unable to comply with the RPO envisaged in NAPPCCC and the Electricity Act, 2003. However, the State of Gujarat has very high potential of wind and solar generation. But the distribution licensees in the State could not fulfill their non-solar RPO due to lower capacity addition and unwillingness of the Wind Generators to supply electricity at the preferential tariff determined by the Commission. Under such a condition, procurement of RECs, would unjustifiably burden the consumers of the State.”

It is interesting to note that in the assessment of RPO compliance for the year 2011-12, GERC had allowed a roll-forward of RPO on the grounds that sufficient RECs were not available.

From the order of 2011-12:

“Non-compliance was primarily due to non-availability of RE power. Though the REC mechanism has been introduced to meet such contingency, availability of RECs was also not adequate. Further, no solar REC was available during the F.Y 2011-12. We, therefore, decide to carry forward the shortfall in procurement of renewable energy during FY 2011-13 by the aforesaid entities to FY 2012-2013.”

Further, GERC’s regulations clearly provide that purchase of RECs is a valid way to meet RPO. This year, GERC even decided to do away with the formality of a roll-forward and instead waived the entire shortfall:

“As pointed out above, both GUVNL and Torrent Power have made sincere efforts to fulfill their obligation under the RPO Regulations. They have been able to establish the fact of non-availability of renewable energy power in the market and also the lack of interest on the part of renewable energy power generators in concluding Power Purchase Agreements with the utilities despite the revision of the wind tariff by the Commission.”

“Any carry forward of the same would add to the burden on the licensees and the consumers. In view of the above, we decide to revise the RPO for the year 2012-13 at actual for the year as a special case in view of the prevailing market conditions at that time.” In our opinion, the order will certainly set a bad precedent for RPO compliance. It is second year in a row that GERC has shied away from enforcing RPO. It provides a strong incentive to Discoms in Gujarat to do even less in the coming year towards fulfilling its obligations.

The order can be read here

Relevant media article – Business Week

MERC tightens RPO compliance & prevents interchangeability

In a landmark decision by Maharashtra state electricity regulatory commission, it was brought forward that the obligated entities of the state (i.e. DISCOMs, Captive and OA consumers) will no longer have the cushion of RPO waiver or interchangeability of solar and non-solar RPO. Hon’ble commission has strongly asserted that all obligated entities in the state will have to meet their RPO targets (cumulatively) before March FY14, which means that all RPO targets from FY11- FY14 will have to met after clearing all previous backlogs.

Such a decision is a good sign for the overall good of REC market, which has already shown signs of increased demand in the last trading session. (For details on volumes follow REC Trading Report – July 2013). The market is expected to conduct trading in August 2013 with an inventory of around 30 lakh plus RECs. If more such decisions from other state regulators are put in place, it eventually will pick RECs from its hitherto floor price. Relevant article in the Economic Times can be read here.

In another decision, the commission proscribed the interchangeability of solar & non-solar RPO. The commission while taking a decision on the petition submitted by Reliance Infrastructure Ltd. (D) referred to discussion of 33rd FOR meeting in which the later deemed such a move as undesirable. The meeting had concluded that interchangeability will put a lot of burden on obligated entities and will in-turn affect consumers with undue cost burden.  RIL had petitioned that since it was unable to comply with non-solar RPO targets, it must be allowed to procure the surplus solar power available to offset the same. The commission responded that such a case is possible only when solar power reaches grid parity. It also highlighted that such a move will also adversely affect the growth and penetration of other renewable energy sources.

The order copy can be found here.

Regardless of varied stakeholder sentiments, both these decisions can be rightly called as a step forward towards promoting more renewable energy in India.

Article in The Guardian

“Hydro Purchase Obligation” may be a reality

The power minister in a statement has given signs that hydro purchase obligation may be a reality as the minister said that the provision is being considered. The idea broke out first when the hydro sub-group had recommended the Power Ministry to declare hydro power (even that with capacity above 25 MW) as renewable, which the ministry had initially refuted. For previous blogpost on similar issue click here.

As per the latest article covered by the media (Business Standard), the ministry is considering of bringing in the concept of Hydro Power Obligation (HPO) aimed at providing a boost to hydro power generation segment.

Stay by Madras High Court on RRF Mechanism

In an important development on the RRF Implementation front, the High Court of Madras has acceded to the request of affected wind developers. According to a circular on IWPA’s website, the Madras high Court has ordered a stay on the full implementation of CERC order on RRF.

The circular mentions that according to the court order, wind projects will need to continue to forecast and schedule their generation, but the court has stayed the collection of UI charges.

It is being expected that the decision on similar petitions in other courts also will follow similar suite. Continuing the scheduling and forecasting will eventually help meet the envisaged objectives of a mock trial, which was lately conducted and concluded in haste. Also, it will be important to keep a track of the implications, if a new order is applied retrospectively at a later stage.

The circular can be accessed here.

Other related information on RRF Mechansim can be assessed in our relevant blog articles as under:

REC Trading Report – July 2013

REC Trading on 31st July 2013 continued to follow the lackluster market scenario. Both non-solar credits (for 11th consecutive month) and solar credits (for 2nd consecutive time) traded at respective floor prices. As per the REC Registry, out of total 2892473 available RECs in the market only 163431 got redeemed, which exhibits a poor 5.6 % only (although the redeemed figure was able to cross the 1 Lac mark in contrast to corresponding figures of last 3 months).

Non Solar RECs:

Total supply of RECs at both exchanges was 2772198, which is around 16 % higher than the supply in June 2013.  Total demand, however was encouraging showing an increase of 122.6 % as compared to demand in previous month. Demand rose by a meager 36% only in June 2013 in contrast to May 2013. This manifests that first month of Q2 FY14 is precursor to a benign market scene going forward. The market clearing volume crossed the 1.5 lac milestone.

In the charts above, it is evident that the yawning gap between supply and demand is usurious and is going to continue the trend, thanks to weak enforcement of RPO.

 Fig 1: Non-Solar REC Trading Stats – July 2013

 Fig 2 : Non-Solar REC Market Clearing Price – July 2013

Solar RECs:

Solar REC Markets have also continued to perform poorly. This is a straight second month in which this market has seen Solar RECs being traded at floor price, since May’12. Supply has, for the very first time, reached a flouting 5-digit figure of 21680 (total at both exchanges), which is an increase of 265 % in comparison with corresponding June 2013 data. Demand continued to disappoint at less than 10 % of the supply. Details of the previous months scenario can be found in the charts below:

Fig 3 : Solar REC Trade Stats – July 2013


Fig 4: Solar REC Market Clearing Price – July 2013

For previous months trading report click here.

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