REC Trade Results November 2015

RECs demand has been steadily rising, and this month results have been very encouraging. Non Solar REC’s and Solar REC’s traded this month were 9.5% and 533% higher compared to trading session of October. The total transaction value of REC’s hit a sum total of Rs 111.7 crores, compared to Rs. 36.5 crores last month.

Analysis of Trading:

Non Solar – Clearing ratio in exchange were at 1.44% and 1.90% in IEX and PXIL respectively for Non Solar REC’s. A total of 2, 31,545 RECs were traded in this trading session (in October 2, 11,442 RECs were traded)Clearing ratio at PXIL reduced marginally but picked up on IEX, as compared to last month.

Solar – Clearing ratio stood at 2.07% and 4.97% in IEX and PXIL respectively, compared to 0.54% and 0.33% last month. A total of 87,767 REC’s were sold in this session, 6.33 times compared to October.

Trading volumes are expected to increase significantly going forward, as most obligated entities are now gearing up to fulfill their obligation considering that only 4 trading sessions are remaining in the current FY . Further, this year we have seen regulatory action in the form of compliance orders and/ or proceedings in several states like Orissa, Kerala, UP, MP and Maharashtra, to name a few. Overall the market showed clear signs of recovery, and is expected to grow further in the closing months of the FY.

The October’s trade results can be accessed here.

REC Trade Results October 2015

The demand response for REC’s saw good momentum in the October’s trading session. The total no. of Non Solar REC’s and Solar REC’s traded in this month were 13% and 28% higher than the trading session of September. The total transaction value of REC’s hit a sum total of 365 Million INR with over 2.25 Lacs RECs sold this session.

Analysis of Trading:

Non Solar – The clearing ratio stood at 0.94% and 2.24% in IEX and PXIL respectively for Non Solar REC’s. A total of 211442 RECs were redeemed in this trading session which was 13.16% higher than the REC’s sold in the previous month i.e 183599 Non Solar REC’sDemand at PXIL picked up significantly compared to previous months.                                                                   

Solar – The clearing ratio for Solar stood at 0.54% and 0.33% in IEX and PXIL respectively. A total of 13851 REC’s were sold in this session which was 27.65 % higher than the REC’s sold in September  i.e 10020 Solar REC’s.

The surge in the REC’s demand clearly indicates the increase of focus on the RPO regulations from both the obligators and the regulators.  As many states in the recent past, via orders, have strictly stated that the obligated entities will have to comply with the RPO targets, it is expected that the REC demand will pick up pace in the near future.

The September’s trade result 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.

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.

ApTel directs SERCs to comply with RPO regulations

The Appelate Tribunal (ApTel) gave its judgment in a petition filed by various association asking the Aptel to give directions to the State Electricity Regulatory Commissions (SERCs) to comply with RPO regulations.

The order is likely to make the routine carry forward and waiver of RPO that has been observed in the last few years much more difficult.

The ApTel has observed that several SERCs are not complying with the RPO regulations. The order states:

“While we accept that a number of State Commissions have been monitoring the compliance of the RPO Regulations by the obligated entities as per their Regulations, in some States it is not being done regularly. We find that some State Commissions do not have compliance status even for FY 2012-13. Some State Commissions have not responded to the notice and have not filed any response. It is also borne out by submissions made by Ministry of New and Renewable Energy and the Central Commission that many obligated entities have not been fulfilling their RPOs and are also not resorting to purchase of REC which has been provided for in the Regulations as a valid instrument for fulfilling the RPO. Some of the State Commissions have been allowing carry forward of the RPO even though RECs are available, in violation of their own Regulations.”

 In the order, the ApTel gave several directions to the SERCs:

  • Directions have been given regarding the setting up of RPO and regular review of the same
  • Carry forward and review shall be done as per the RPO regulations. The order further states:

“If the Regulations recognise REC mechanism as a valid instrument to fulfill the RPO, the carry forward/review should be allowed strictly as per the provisions of the Regulations keeping in view of availability of REC”


“In case of default in fulfilling of RPO by obligated entity, the penal provision as provided for in the Regulations should be exercised”

  • Power to relax and remove difficult should be used judiciously. The order states:

“The provisions in Regulations like power to relax and power to remove difficulty should be exercised judiciously under the exceptional circumstances, as per law and should not be used routinely to defeat the object and purpose of the Regulations”

The ApTel order can be read here.

ApTel order on waiver of RPO by GERC

In its order pertaining to FY 2012-13, GERC had waived or exempted obligated entities from RPO. In doing so, GERC has ignored the availability of RECs, and also reduced RPO differentially for each obligated entity, to the extent met by them. In earlier years, GERC had rolled-forward the RPO.

The Aptel found several inconsistencies with the approach of GERC. In the order it stated:

  • RPO can be revised, but effort to comply has to be demonstrated. The order states:

“The State Commission can revise the RPO before or during a year or after passing of year under Regulation 4.2 of RE Regulation 2010 as explained under paragraphs 47 to 51 above. If the distribution licensee has not made efforts to procure requisite renewable energy to fulfill the RPO and also has not procured REC, the State Commission should not revise RPO under Regulation 4.2. However, while revising the RPO targets, the State commission has to ensure that such revision should not defeat the object of the Electricity Act and the Regulations.”

  • If RPO are revised due to inadequate capacity addition in the state, such revision has to be uniform for all obligated entities.
  • RPO cannot be carried forward when RECs are available. The order states:

“…before exercising power order Regulation 9, the State Commission has to satisfy itself that there was difficulty in meeting the RPO from purchase of REC. Therefore, non-availability of REC is a pre-conditition for carry forward under Regulation 9.”

The detailed order can be read here

REC Trade Results April 2015

We are pleased to share the Result of REC trading for the month of April-15.

  • Solar RECs – Overall market clearance remained poor this time, with very low demand at both exchanges. Demand saw a dip from 68,982 last month to 8,522 this time, and this was expected in the first month trading of FY 2015-16. Market clearing ratio was very low, 0.68% in IEX and 0.23% in PXIL, with overall clearing ratio standing at 0.48% compared to 0.54% during April-14.
  • Non Solar REC market expectedly dipped from 654,985 last month to a very low figure of 55,612 RECs this month. The clearing ratio was good relatively better on IEX, but the overall market clearing ration of 0.52% stood well below 1.4% during April-2014.

The REC trade results in the FY 2014-15 is summarized below for your reference.




Team REConnect

Go to top