REC Trade Result July 2016

In contrast to June 2016, which saw huge demand for both Non-solar and Solar RECs, this month trading did not fare that well.  This month trading saw a dip in the demand for both Solar and Non-Solar RECs. The demand though increased twice the amount in comparison to July 2015.  The total transaction value stood at roughly half as compared to previous month, i.e. 40 Crores as compared to 80 Crores last month.

Analysis of Trading:

Non Solar – Clearing ratio in exchange stood at 1.91% and 1.69 % in IEX and PXIL respectively for Non Solar REC’s.

Solar – Clearing ratio stood good at 1.17% and 0.97% in IEX and PXIL respectively.

The graphs are given below:



Analysis of CERC’s 4th Amendment to REC Regulations

CERC published the 4th Amendment to REC regulations in end-March. These regulations will have a significant impact on the RECs markets going forward, as a large portion of the existing capacity under the mechanism will become in-eligible for RECs.

In summary, the following projects will no longer be eligible for RECs:

  • Open access projects that avail concessional wheeling or banking benefit
  • Captive or self-consumption projects commissioned before 29 Sept 2010 or after 31 March 2016 (ie, before the RECs regulations first amendment when captive projects were made eligible and after this amendment)
  • Captive or self-consumption projects commissioned between 29 Sept 2010 or after 31 March 2016 but avail concessional wheeling or banking benefit

Our analysis suggests that several projects will become ineligible for RECs. The largest impact will on bio-fuel co-gen projects and biomass projects, as a large portion of these projects are captive or self-consumption projects commissioned prior to 29 Sept 2010. Older wind projects under group-captive mechanism (predominantly in TN and Maharashtra), and captive small hydro projects will also be impacted.

Solar projects are likely to have minimal impact as most projects are commissioned after 2010.

Source: REC Registry website; REConnect Analysis


This will lead to significant reduction in RECs issued. Our estimate suggests that the reduction could be as high as 40-50% of existing RECs issuance (in FY 15-16, total non-solar RECs issued were 73.6 lakh).

As a result, it is likely that demand for RECs will outstrip supply on an annualized basis during FY 16-17. However, large existing inventory of RECs will ensure that for FY 16-17 trading prices remain at floor-price and clearance remains low.

Note: The above issuance and demand are cumulative for the year (it does not include existing inventory of RECs)

Source: REC Registry website; REConnect Analysis


The regulation can be accessed here.




REC Trade Result March 2016

March, being the last month of the Financial Year to fulfil the yearly RPO obligations, saw significant rise in demand in both the Solar and Non-Solar segments, as compared to the last three months. Non-Solar RECs demand almost doubled and Solar RECs demand rose by 68.45%, as compared to February. This was the result of stricter compliance and can also be attributed to the recent Ad by MNRE asking all entities to fulfil their obligation. The total transaction value stood at 213.3 Crores as compared to 119.5 Crores last month.

Analysis of Trading:

Non Solar – Clearing ratio in exchange stood at 7.65% and 8.93% in IEX and PXIL respectively for Non Solar REC’s. A total of 11, 14,319 RECs were traded as compared to 586,501 RECs traded in February. Overall, it was a good recovery in this segment, which also saw the closing Inventory come down marginally.

Solar – Clearing ratio stood good at 5.07% and 3.35% in IEX and PXIL respectively, with total clearing volume of 152,006, as compared to 90,236 last month. The recovery was good, but contrary to the Non-Solar inventory, the solar inventory showed no reduction.


As compared to March-2015, where the Non-Solar and Solar demand stood at 654985 and 68982 respectively, it was 70% and 120% higher for Non-Solar and solar respectively, in March-2016. However, the closing inventory for the FY stands at 13.28 million and 3.31 million for Non-Solar and Solar respectively, worth close to Rs. 3151 Crores. April-2015 trading saw huge clearance due to late fulfillment of obligations, and the same can be expected next month as well.

We are hopeful that the FY 2016-17 will bring good fortune to the REC market, considering the proposed regulatory changes and more stricter enforcement by states, which will bring back stakeholders confidence.

Analysis of Draft Regulations on Forecasting and Scheduling of Wind and Solar Generating Stations – Rajasthan

CERC had notified forecasting and scheduling (F&S) regulation for inter-state sale of power a few months back. Subsequently, the Forum of Regulators (FoR) had come up with model regulations for forecasting and scheduling at the intra-state level. Rajasthan has published the draft forecasting and scheduling regulations

in line with the FoR model Regulations. Rajasthan is the fourth state to do so in recent days – MP, Karnataka and Tamil Nadu are the others.

Executive Summary:

  • The regulations will be applicable on all wind and solar generators with individual or combined capacity of 5MW and above that are connected to the state grid
  • Deviation will be calculated on the basis of available capacity
  • Settlement with the buyer will be on the basis of actual generation

Qualifying Coordinating Agency (QCA) will play a key role in the total process. QCA will be  responsible for forecasting, telemetry, scheduling and settlement of deviation.

The draft regulations are in-line in every aspect with the model F&S regulations released by FoR earlier. However, the model FoR regulations had proposed a 10% deviation band for new projects and 15% for existing projects. Rajasthan has proposed a 15% band for all projects.

Detailed Analysis:

Forum of Regulators have recently come up with model regulation for forecasting and scheduling and deviation settlement mechanism. The primary objective is two fold :

a) facilitate large-scale grid integration of solar and wind generating stations, and b) maintaining grid stability and security.

Highlights of the regulation are below: -

  • All solar and wind generators connected to State grid have to provide day-ahead and week-ahead schedule – Revisions can be made on a one-and-half hourly basis.
  • Payment for generation shall be as per actual generation (this is different from the inter-state  regulation, where payment is on the basis of scheduled generation).
  • The deviation slab has been kept as (+/-)15% for all generators at Intra-state level.
  • Penalty is calculated at fixed amounts per unit (whereas, for Intra-state it is calculated as a percentage to PPA rate) -
  • RPO accounting can continue as per existing arrangement, and needs no change.

The SLDC will also conduct a forecast of its own with the primary purposed of ‘secure grid operations by planning for the requisite balancing  resources.

Applicability of Regulations

  • All wind and solar generators connected to the State grid are covered:
  •  Having capacity of 5MW and above individually or in aggregate.
  • Regardless of date of commissioning.
  •  Including those connected via pooling stations
  • Selling power within or outside the state. Detailed Mechanism defined for Deviation.

Settlement calculation or Intra-state sale of power is as follows:

Detailed Mechanism defined for Deviation Settlement  calculation or Intra-state sale of power is as follows

In case of Intra-State transmission, Penalty Mechanism for existing generators :

The Draft Order can be accessed here.


REC Trade Results September 2015

Demand for both Solar and Non Solar REC’s remained lackluster in this trading session. A sum total of 1, 93,619 Solar and Non Solar RECs were sold in the current trading session. The total transaction value of REC’s was a paltry Rs.35.1 crores.

Analysis of Trading:-

Non Solar – Clearing ratio in exchange were at 1.68% and 0.77% on IEX and PXIL respectively for Non Solar RECs. A total of 1, 83,599Non Solar RECs were redeemed in this trading session. However the demand improved by 72% with respect to the August trading session.

Solar – Clearing ratio stood at 0.45% and 0.18% on IEX and PXIL respectively. Demand for Solar REC’s dipped to a low figure of 10,020 REC’s, 75% lower thanthe trade during August trading session.

The responses seen in the Solar REC’s segment were lower than expected. In August, total 41,928 RECs were sold.

Over the longer term, increasing focus on RPO both from the courts and from regulators is expected to increase demand. For instance OERC in its recent order on 11th August, 2015 stated that the reasons quoted by the obligated entities for non-compliance were found inappropriate and it is expected that in line with the order, the obligated entities will comply with the RPO targets, and thus we expect a surge in demand for Solar RECs in the coming months. More about the order can be read here.



August trading session saw a stagnant response from the Non-Solar demand side. However the Solar RECs saw a huge recovery from rise in demand during trading session. A sum total of 149,209 RECs were redeemed in this session, compared to 173,223 in July. Demand took a fall of approx. 14 % w.r.t July.

Analysis of Trading:-

Non Solar – Clearing ratio in exchange were at 0.92% and 0.75% in IEX and PXIL respectively for Non Solar RECs. A total of 107,281 RECs were redeemed in this trading session. There was a fall of approx. 30 % in the current trading session w.r.t to July.

 Solar – Clearing ratio stood at 1.52% and 1.86% in IEX and PXIL respectively. Solar RECs rose staggeringly from 17,952 in July to 41,928 this trading session, a rise of 133%. This was good signs for solar, as it has recovered again from major fall last MONTH,

Over the longer term, increasing focus on RPO both from the courts and from regulators is expected to increase demand. Over the last several months many developments have taken place, including the draft Electricity Act, orders from the ApTel and from the Supreme Court. The most recent development was the release of the draft of Renewable Energy Act 2015. An analysis of the Act can here

REC Trade Results July 2015

July’s trading session saw a stagnant response from the demand side. Though, the current demand while comparing it to previous year’s session of July was 3 times higher in Solar and 5 times in Non Solar segment, it indicated a lower compliance when comparing it to trading sessions of 2015. A sum total of 173,223 Lakh RECs were redeemed in this session. Demand took a fall of approx. 5 % w.r.t June.  The demand in last two trading sessions was due to the judgment by Supreme Court.

 Analysis of Trading:-

 Non Solar – Clearing ratio in exchange were at 1.33% and 1.15% in IEX and PXIL respectively for Non Solar RECs. A total of 155,271 RECs were redeemed in this trading session. There was seen a fall of approx. 4 % in the current trading session w.r.t to June in Non Solar RECs.

 Solar – Clearing ratio stood at 0.84% and 0.29% in IEX and PXIL respectively. Solar RECs remained at 17,952, which is a show towards a downfall in the demand in the solar RECs segment; it shows a fall of 5640 RECs from June trading session.

Over the longer term, increasing focus on RPO both from the courts and from regulators is expected to increase demand. Over the last many months several developments have taken place including the draft Electricity Act, orders from the ApTel and from the Supreme Court. The most recent development was the release of the draft of Renewable Energy Act 2015. An analysis can be read here.

Team REConnect

Analysis of the 5th Amendment to REC Regulations


Recently, CERC proposed the 5th amendment to REC regulations. The gist of proposed changes is:

  • Captive generators and portion of power for self-consumption will no longer be eligible for RECs
  • If an open access (OA) project avails concessional wheeling, banking or cross-subsidy benefits, it will not be eligible for RECs

These changes have been proposed in the context of an REC market that faces significant oversupply. As on June 30 2015, RECs worth 2,650 crore remain unsold, and clearing percentages in many months are well below 5%. In most months, more RECs have been issued than redeemed, further aggravating the problem of over-supply.

In the explanatory memorandum, CERC has elaborated on the thinking behind the proposed amendment. The memo states:

Lack of RPO enforcement has been one of the major reasons for the high level of unsold REC inventory. However, it is also important to analyze the supply side aspects and understand whether the right beneficiaries (as was envisaged while introducing REC framework) are participating and able to compete in the REC market. It remains a fact that a major portion of the REC inventory is contributed by the CGPs. Also, developers under third party model are able to leverage the concessional benefits while participating under 
REC framework.” (Emphasis added)


“Around 51% of the projects under the CGP route were commissioned before the first notification (14 January 2010) of the REC Regulation. These projects must have computed their financial viability without the REC benefit.” 

The proposed changes will have far-reaching implications on the REC market structure. As per data provided in the Explanatory Memo approximately 41% of the capacity (under captive generation) will be completely excluded from RECs markets, and a significant portion of OA capacity (19% of total) will be impacted.

Analysis by REConnect Energy suggests that annual RECs generation may fall from 96.25 lakhs in FY 14-15 to 54.30 lakhs per year after the amendment.

Table: Annual RECs Issuance

 Sources: REC registry website; REConnect analysis

Note: Annualized redemption is assumed to be 2X times redemption is FY 14-15. Increase is expected due to SC order and Electricity Act amendment.

Impact on Open Access (OA) projects:

The proposed amendment is contrary to the provision in the draft Electricity Amendment bill (EA Bill) in the Parliament, and of many state policies.

The EA Bill says:

Sec 42(4):

“The open access consumers procuring electricity from renewable energy sources shall not be required to pay the surcharge for open access for such period as may be prescribed by the Central Government”

 Surcharge in the above context means cross-subsidy surcharge (CSS).

 If the EA Bill is to be passed by the Parliament, the impact of the 5th Amendment will be to make all RE projects in OA ineligible for RECs. This will discourage OA in renewable energy – something that goes against one of the principle objectives of the EA and of CERC (to encourage market development in the electricity sector).

Further, many states allow concessional cross-subsidy or exemption from cross-subsidy as a way to promote open access in RE projects. For example, Rajasthan’s solar policy exempts solar projects under open access from CSS. Similar provisions exist in many state policies.

Renewable Energy projects will not be viable under open access without concessional CSS provided by the states. States realize this – and therefore the concession exists in the first place. If RECs benefits were to be denied to such projects, it’s the equivalent of giving from one hand and taking from another. The net result of the amendment will be to completely finish-off the OA market for RE power – this is something that will be contrary to one of the fundamental pillars of the Electricity Act.

Further, in many existing OA transactions, prices are likely to have been negotiated knowing the fact that the RE project will get revenue from RECs. Such projects may suddenly become unviable. In many states with low tariffs, such projects will not remain competitive without RECs and therefore risk becoming NPAs.

Impact on Captive Generating (CGP) projects:

As mentioned above, the impact on CGPs of the amendment will be drastic. All CGP’s will be considered ineligible for RECs benefits. However, in proposing the amendment, CERC has failed to consider the case of two categories of projects–

(1)   CGPs set up specifically to meet RPO requirements, and

(2)   CGPs under the group captive mechanism

Since CERC amended the RECs regulation to allow self-retention of RECs by obligated entities, many companies have set up CGPs in one state and meet their obligation in other states through retention of RECs. This approach has multiple benefits – it has encouraged setting up of new RE capacity, and also helps the obligated entity manage its compliance costs.

The proposed amendment will take away this benefit to obligated entities. This is erroneous on three counts – (a) the CGP is likely to have been setup by the obligated entity to meet RPO across units. Such an investment, made in good faith keeping in mind existing regulations, may become redundant after the regulation, (b) it will discourage setting up of large new RE capacities as obligated entities will not be able to meet RPO in states that have low RE resources, and (c) it will take away a valid means for obligated entities to comply with RPO, leaving them with very limited options – buying of RECs.

Group captive projects, on the other hand, also face difficulties due to the amendment. In many group captive projects, the primary investment is made by an investor, and power prices are determined through negotiations. Further, such projects tend to be long term in nature as they involve an element of equity investment by the consumer. A sudden change in RECs eligibility is likely to make such projects unviable, and result in severe losses to investors who set up projects assuming a stable RECs regime.

Overall, we believe that while CERC’s intent to correct the supply imbalance in the RECs market is needed, the unintended consequence of the 5th amendment on open access and captive projects will be harmful to the growth of the renewable energy industry.

REConnect Newsletter Volume 52 (June 2015) – OPEN ACCESS

Dear Reader,

 We are please to present OPEN ACCESS – our monthly newsletter that covers important developments in the renewable energy markets. This month’s newsletter covers:

  • Detailed analysis of the 5th Amendment to REC regulations proposed by CERC. This amendment will have significant impact on renewable energy based CPPs and OA projects, and also on the market demand-supply situation down the road
  • Updates on regulatory changes from Gujarat, Telangana, MP, Mahasrashtra, JERC and Rajasthan
  • Analysis of the REC trading sessions in June. Demand was well below May trading volumes. However, the broad trend remains positive due to the SC order on RPO.

 The newsletter can also be downloaded by clicking here - or past newsletters from here.

We hope you enjoy reading the newsletter. Please send us comments and feedback.


 Team REConnect

REC Trade Results – June 2015

The June trade session remained below expectations compared to May’15 month performance. However, if we compare the performance with Jun’14, the response was still far better. After the announcement of an important judgment by Supreme Court, the market looks upbeat and we can expect better demand in upcoming trade sessions.

Analysis of Trading:

Non-Solar – Total 161,845 RECs were cleared in this trading session. IEX and PXIL had a clearing ratio of 1.6% and 0.84% respectively. Total RECs redeemed this month was approx. 1 Lakh RECs lower w.r.t May’15.

Solar - RECs redeemed this month remained at 23,648 RECs. The clearing ratio was 1.4% and 0.17% in IEX and PXIL respectively. Solar REC traded this month were approximately 60 (sixty) thousand lower w.r.t to May trading session.

The REC trade results in the FY 2015-16 are summarized below for your reference.

Go to top