REC Trade Report – March 2014

We are pleased to bring the REC trade results and our analysis on REC trade session conducted on 26th March 2014. Following is a brief of the analysis:

With this trade session, a 12-month long financial year FY 2013-14 comes to an end. The prices for both credits (solar as well as non-solar) remained at floor for most part of the year.  Poor enforcement measures of RPO across states saw a continuous lack of demand in the market.

Close to 17.5 lac RECs were issued in March’14 itself, which is a huge 15 % (approx.) of the total RECs issued till date in India (since March 2011) . This can be attributed to issuances of RECs w.r.t sugar co-gen units in Uttar Pradesh.

A strong policy review is the need of the hour. It is likely and should be expected, that the forum of regulators (FOR) takes up this issue for discussions during the forthcoming 40th meeting scheduled on 2nd April 2014.

Non Solar RECs –

Non Solar REC Supply grew by around 22%. Demand also went up by a massive 74%, owing to March being last month of FY14 (and not due to strong RPO enforcement). Evidently, clearing volume also touched a new high of around 6.5 lac RECs.

Non-Solar REC Price continued to trade at floor price of Rs. 1500 per REC.

Solar RECs

In case of solar RECs also all volumes had an uptick. Supply was up by 13.22.6 % and demand by 32.63 %. The total clearing volume of solar RECs at both exchanges was 11,019 RECs.

As per REC registry, 24370 solar RECs were issued in March 2014.

Unlike in non-solar REC markets, the solar RECs started trading at floor, only from June 2013. The discovered price of solar RECs remained at floor – Rs. 9300 per REC.

Keeping in view the overall market performance, it can be said that the time ahead for investors in solar REC markets remains grim.

For a similar blog-post covering analysis on previous months trade session – click here.

A quick glimpse of trade stats can be had on our Market Tracker.

Gujarat bans sourcing power from other states

Gujarat government has recently banned its state distribution companies from buying power from other states. These discoms will now have to procure power from state power generators.

Power procurement from state power generators means industries will now have to shell out more money from their pockets. The increase of Rs. 2.75 per unit is expected, taking the net power cost per unit touching Rs. 7.

As per an article in Economic Times, industries in Gujarat route around 1000 MW from other states via power exchanges while 2500 MW of state power generation companies are sitting idle.

GETCO; state transmission company has written letters to 125 industries, quoting the following:

“Due to rise in the system load demand, leading to grid constraint in the upstream network, it shall not be feasible to permit short-term open access to consumers as per enclosed list with effect from March 20,”

The decision has also taken into consideration the intent to reduce solar power tariff in the state. The state is said to have tied up for 950 MW at a higher solar tariff as against the requirement of 350 MW under solar obligation.

Aggrieved by the move, which is seriously questioning the viability, the industries association of the state are going to give a presentation to the govt. in the coming days.

An article in Economic Times can be accessed here.

Joint ERC proposes amendment to RPO regulations

JERC; the joint electricity regulatory commission for the state of Goa and UTs has recently proposed a draft to its principal RPO regulations of 2010. The main highlight of the amendment is the declaration of RPO targets from FY14-FY22. The targets set for the years till FY22 are as in the table below:

There were few other changes in definitions as:

1. Renewable Energy Sources – Electricity generating sources recognised or approved by the Ministry of New & Renewable Energy and includes bundled power purchase (to the extent of renewable energy content in the bundled power), power generated  from cogeneration based power plants and certified by the state accredited agency. 

2. Obligated Entity – the entity mandated under clause (e) of sub-section (1) section 86 of the Act to fulfill the renewable purchase obligation under these regulations and includes distribution licensee, captive user for 1 MW and above with fossil fuel (excluding co-generation based captive power plants) and open access consumer.

3. Renewable Purchase Obligation – quantum as mandated under clause (e) of sub-section (1) of section 86 of the Act and specified under these regulations for the obligated entity to purchase electricity generated from renewable energy sources. 


Comments on this were invited by 23.01.2014.

The draft order on amendment can be accessed here.

Principal RPO regulations 2010 of JERC are available here.

MERC asks BEST to meet shortfall in RPO by March 2014

Electricity Regulator of Maharashtra (MERC) on 6th March 2014 released 3 separate orders with regards to verification of RPO compliance of state discoms; namely Reliance Infrastructure Limited – Distribution (RIL-D), Tata Power Company – Distribution (TPC-D) and Brihan Mumbai Electric Supply and Transport (BEST).

Maharashtra currently has the following defined RPO targets in its relevant regulations.

Further, the Distribution Licensee(s) are also mandated to procure 0.1% per year of their Non-Solar (other RE) RPO obligation for the period from FY 2010-11 to FY 2012-13 and up to 0.2% of their Non-Solar (other RE) RPO obligation for the period from FY 2013-14 to FY 2015-16 by way of purchase from Mini Hydro or Micro Hydro power project.

Recently there were updates that Govt. is mulling to introduce hydro-tradable certificates. More on this can be read here

Order w.r.t RIL – D:

In an order dated 5th Dec 2012, MERC had waived/relaxed the shortfall in RPO compliance for FY11 & FY12 and had ordered cumulative compliance of this shortfall along with RPO targets of FY13. Subsequent to this, it was reported that RIL-D had complied with all RPO targets (Non-Solar + Solar) before the deadline of 31st March 2013, except that in case of Mini/Micro Hydel Power projects.

RIL-D fulfilled solar RPO targets with a surplus of 2.13 MUs and non-solar RPO targets with a surplus of 9.29 MUs.

In the present order (refer), MERC has relaxed RPO shortfall in terms of hydro power RPO to FY16, thereby declining the prayer of Reliance to completely waive off such targets. MERC was of strong view that such waive off will be against the intent of having a specific RPO targets from Mini/Micro hydel projects.

RIL-D has now been directed to fulfil shortfall in hydel RPO cumulatively by 31st March 2016.

Order w.r.t Tata Power – D:

Regarding solar RPO compliance, MERC had already directed TPC-D, through an order dated – 20th Dec 2013, waived/relaxed the shortfall in solar RPO till FY16.

Non-solar RPO has been complied by TPC-D with a surplus of 1,2 MUs, except hydro RPO targets.

Current Order waives/relaxes this hydel power purchase requirement by allowing TPC-D to meet the same by FY16.

Order can be read here.

Order w.r.t BEST:

In case of BEST, solar RPO targets were relaxed in an order in Case NO. 30 of 2013. Shortfall in solar RPO is to be met cumulatively by FY16.

MERC noted that BEST has fulfilled its RPO targets w.r.t hydro power cumulatively by FY13.

However, the shortfall in meeting non-solar RPO targets till FY13 is 4.23 MUs which is to be cumulatively met along with RPO target of FY14. This is to be positively complied before 31st March 2014 to repel any regulatory charges, meaning BEST may have to purchase equivalent amount of RECs from the Market in the last trading session of this fiscal.  In our analysis, the approximate requirement in terms of RECs comes down to  4,64,230 non-solar RECs (For gross consumption in FY14 – Refer Page No. 157 – T.O FY13-16 BEST).

Order in case of BEST can be read here.

Our past blog-posts on RPO in Maharashtra can be accessed here –




Gujarat’s first amendment to RPO regulations

Gujarat Electricity Regulatory Commission (GERC) on 4th March 2014 amended its principal RPO regulations of 2010. In these regulations, Gujarat set its RPO targets post FY13. The RPO set are from FY14 to FY17.

Gujarat announced 10% of energy procurement to come from renewable sources, for its obligated entities for FY17.

The year-wise RPO targets effective April 2014 are tabulated below:

GERC also introduced the definition of APPC which was hitherto missing. Average Power Purchase Cost (APPC) for the purpose of REC Mechanism is in line with that of CERC and is defined as –

‘Average Power Purchase Cost’ means the weighted average pooled price at which the distribution licensee has purchased the electricity including cost of self generation, if any, in the previous year from all the energy suppliers long-term and short-term, but excluding those based on renewable energy sources, as the case may be.’

In addition, GERC also clarified that a RE project registered under REC mechanism selling power under captive or third party mode will receive payment equal to APPC for excess injection after off-setting its own consumption, from the discom.

The present order on amendment can be accessed here

The principal RPO regulations of 2010 can be read here

Rajasthan proposes amendment to RPO regulations

Hon’ble Rajasthan Electricity Regulatory Commission (RERC) has recently proposed an amendment to its principal RPO regulations. Comments have been invited by all stakeholders no later than 18th March 2014. Link to the proposal –

These changes, if incorporated into the RPO regulations will have significant impact on CPPs and OA in Rajasthan.

Following are the highlights of such changes –

1)      Solar RPO will have to be fulfilled separately,

2)      Co-gen and WHR power will no longer be allowed to offset RPO, and

3)      The RPO percentages will increase.

4)      Stricter enforcement of RPO likely.

The proposed changes are discussed in detail below:

Inclusion of Solar RPO for captive power plants (CPP) and open access consumers (OA):

In the present regulation there is no separate solar RPO. As a result in most cases CPPs and OA consumers would meet their obligations through non-solar sources. The proposed amendment introduces a separate carve-out for solar RPO that can be met through solar power/ solar REC alone.

However, the requirement of meeting solar RPO separately will only apply to CPPs and OA of 10MW or more installed capacity. CPPs and OA below 10 MW will be required to meet RPO in total only, as is the present case.

This change will bring Rajasthan RPO in line with most other state RPO regulations, and also in line with the National Tariff Policy. After this change, Karnataka will remain the only exception where CPP and OA do not have a separate Solar RPO.

Removal of Co-generation as RE power:

The present regulation considered co-generation as equivalent to RE power. As a result several CPPs and OA could fulfill their RPO obligations by consumption of co-gen power. In a separate pronouncement, the Rajasthan Electricity Regulatory Commission (RERC) has considered Waste Heat Recovery (WHR) as co-generation.

The proposed amendment will not allow offsetting of RPO from conventional power generation or OA from co-gen power. This change follows the recent order of ApTel in the case of Lloyds Metal & Energy. The order can be accessed here. Our blog-post covering the issue can be read – here.

In the above order, ApTel has stated the following:

Upon conjoint reading of the provisions of the Electricity Act, the National Electricity Policy, Tariff Policy and the intent of the legislature while passing the Electricity Act as reflected in the Report of the Standing Committee on Energy presented to LokSabha on 19.12.2002, we have come to the conclusion that a distribution company cannot be fastened with the obligation to purchase a percentage of its consumption from fossil fuel based co-generation under Section 86(1)(e) of the Electricity Act, 2003. Such purchase obligation 86(1)(e) can be fastened only from electricity generated from renewable sources of energy.

It is important to note that co-gen power will continue to be exempted from RPO (as per several orders from ApTel earlier). However, such power will no longer be allowed to offset RPO emanating from other sources like conventional generation or OA. This change will bring Rajasthan RPO regulations in line with the regulations of most states, and with the interpretations of Aptel.

Increase in RPO percentages:

The proposed RPO percentages are:

CPP & OA Consumer with total capacity of 10 MW and above:

Year Non-solar RPO Solar RPO Total RPO
2014-15 7.50 1.50 9.00
2015-16 8.20 2.00 10.20
2016-17 8.90 2.50 11.40

CPP & OA Consumer with total capacity of more than 1 MW bet less than 10 MW:


Total RPO %







Stricter enforcement of RPO likely

RERC notes the following in the proposed amendment: certain CPP & Open Access Consumer have made an appeal in Hon’ble Supreme Court against this order of Hon’ble[Rajasthan] High Court. As there is no stay in the matter, the obligated entities are bound to comply with RPO mandate. Further, RERC has also mentioned that the state agency is in the process of identifying compliance levels by CPPs and OA in the state. These comments point to a stricter enforcement of RPO in the near future.

JNNSM Phase 2 Batch 1 bid results

We thank solar industry expert – Mr. Gopal Lal Somani, who has graciously provided his inputs and comments on the results of bidding process. 

The MNRE had authorized Solar Energy Corporation of India (SECI) to implement NSM Phase 2 program. In light of this, SECI auctioned 750 MW of solar energy projects and announced the financial bid results on 21st February 2014. In the subsequent paragraphs, we have covered these results in detail.

A total of 68 bids were received from 58 developers, covering 122 projects with a cumulative capacity of 2,170 MW. Of this, 36 projects with a capacity of 700 MW opted to bid under the Domestic Content Requirement (DCR) part A of the bidding process and the remaining 86 projects with a capacity of 1,470 MW opted for the open category Part B. Each part eventually got allocated an equal 375 MW capacity projects. Bids by PMP Auto Components, Zandu Realty, Golden Crystal and Green Energy Wind were cancelled as they did not meet the techno-commercial criteria. The bid by Moser Baer was cancelled as they could not provide bank guarantee.

Figure 1 : Total projects & cumulative capacity that participated in bidding of JNNSM Phase 2 Batch 1.

The financial bids followed a technical qualification round. Developers competed in the reverse-bid auction in two parts. Half the 750MW available had a mandatory domestic content requirement (DCR), and the other 375MW was left open with no domestic requirement.

The US filed a complaint to the World Trade Organisation earlier this month claiming that it should have equal access to the procurement round. First Solar had dominated the thin film market in Phase I Batch 1 & 2; courtesy a loop hole in previous JNNSM bids. The company which worked with the US Export-Import Bank on a number of projects, missed out its share in this bidding cycle. India in reply to allegations from US said – that First Solar had missed out “only based on the bid submitted by them. There are no political considerations. India cannot be blamed to be investment unfriendly”.

The reverse bid mechanism included bids for viable gap funding (VGF), a government capital subsidy to provide up to 30% of JNNSM project costs subject to maximum Rs. 250 lac / MW. There is a cap of up to 50MW per developer for funding applications.

The lowest bid under the DCR was for INR 13.5 million (US$0.2 million) by Swelect for 10MW and highest bid has been INR24.9 million (US$0.4 million) by IL&FS Renewables also for 10MW. Under the DCR, another 15 PPAs are to be signed for 21 projects, totalling 375MW.The lowest and highest VGF sought for projects outside the DCR were INR 1.7 million by Gujarat Power Corporation Limited (10 MW) and INR 24.9 million by Madhav Infra (10 MW) respectively. The highest bid under the non-DCR category is INR 24.5m (USD 0.4m) by Tata Power Solar. Under the non-DCR category, 15 project developers will be invited to sign power purchase agreements (PPAs) for 24 projects totalling 375 MW. Part A with the DCR oversubscribed twice whereas the non-DCR (open) part B four times over. The entire capacity of 750 MW will be converted into Letters of Intent (LOI) likely to be confirmed to respective winning bidders by end of February.

Figure 2 : Maximum-Minimum VGF sought in JNNSM Phase 2 Batch 1.

Average VGF (DCR) – 22.14 million INR, Average VGF (non-DCR) – 15.7 million INR

The average project size per developer would be around 25 MW and top solar potential states i.e. Gujarat and Rajasthan are the most preferred locations opted by most developers for implementation.

VGF payments are estimated for non-DCR projects to cost INR 97 billion (US$1.5 billion), whereas the DCR bids are estimated to cost much more at INR 160 billion (US$2.5 billion).

The difference in government funding of INR 63 billion (US$1 billion), has sparked questions from solar industry analysts who are of the view that this funding should have been extended as direct funding to encourage domestic manufacturing instead.

It is speculated that some of the winning firms who made aggressive bid would not sign the PPA and therefore the figures will not be final until PPAs are signed, which is expected to happen by March/April 2014.

21st February 2014 was a momentous day for solar in India as financial bids were opened at SECI.

It may also be noted that the tariff for the NSM Phase II batch I projects were fixed at Rs. 5.45/kWh while the bids were called for Viability Gap Funding (VGF) required by the developer.

Bidders enthusiasm and aggression in bidding perfectly matched with NSM Phase I Batch 1 and 2 success stories. This he infers is due to declining cost trends in EPC cost, more reliable players in the market, lenders confidence in funding on higher efficiencies/output, improved performance, improvised O&M (evidently observed in Phase I projects) and bankable PPA with SECI.

The lowest bid for VGF has been made by GPCL (Gujarat Power Corporation Ltd), a Gujarat State company; also the promoters of Gujarat Charanka Solar Park. This was the first solar park in the country with more than 500MW installed capacity. The VGF bid by GPCL was a jaw-dropping Rs. 17.5 lakhs/MW in the non-DCR category. The next bid in the non-DCR category was Rs. 73.29 lac /MW by Sun-Edison, a US based developer.

Amongst wide variance in bidding amounts from various bidders in Part A and Part B, there were some bids in Part A which matched with those of Part B, which is an indication that VGF can now be capped at INR 135 Lac/MW and going forward paves the way for subsequent bidding cycles conducted for entire capacities under VGF as it creates more jobs and thrives economic development of India.

This will also allow large scale solar energy deployment and boost local solar industry for sustainable development.   The success of this bidding has reconfirmed the interest of investors in solar projects and is a big booster from crawling solar market.

The heavy VGF discounting seen in Part A and Part B is almost unbelievable but allows Solar Power emerge  as a clear winner.

“Achieving status of financial closure by all winning bidders would be a world class result ever seen elsewhere in emerging markets.”

For a brief profile of Mr. Somani please visit page 4 of our NL Vol. 39

REConnect Newsletter Volume 39 – OPEN ACCESS

We are pleased to present the 39th Volume of “OPEN ACCESS” – our monthly newsletter on REC Mechanism.

The present volume covers analysis on following main topics:

  • Detailed analysis of the bidding under JNNSM Phase 2 by solar industry export Shri Gopal Somani
  • Various regulatory updates including review of revised procedures for RECs accreditation, registration and issuance. Details about reterntion of RECs for own RPO fulfillment are also included.
  • REC trading analysis for February 2014.

To access the current volume (OPEN ACCESS Vol. 39) please Click Here

To read past volumes of our newsletter please follow this link.

We hope you will find this volume of OPEN-ACCESS an insightful read. As always, look forward to your feedback and continued support.


Team REConnect

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