REC TRADE RESULTS MARCH 2018

For the first time after 2012, the total demand in REC (Non-Solar Segment) market exceeded the supply available. The trade session in March 2018 also ended the dry run that REC Market has been under since 2012 with 100% clearance on both the Power Exchanges!

Non-solar demand was significantly higher than in March 2017, and also last month. In total 27.69 lakh RECs were traded (211.63% higher than March 2017, and 17.43% higher than in February 2018), and clearing ratios on IEX and PXIL were 100% and 100% respectively. Total traded value was Rs 415 crores (This value is calculated considering the rate of Rs 1500 per REC out of which Rs 1000 go to the generator and Rs 500 goes to CERC).

Trading of solar RECs continues to be suspended due to the stay imposed by the Supreme Court.

 

This value is calculated considering the rate of Rs 1500 per REC out of which Rs 1000 go to the generator and Rs 500 goes to CERC

REC TRADE RESULTS FEBRUARY 2018

Non-solar demand was significantly higher than inFebruary 2017, and also last month. In total 23.58 lakh RECs were traded (125.85% higher than February 2017, and 91.61% higher than in January 2018), and clearing ratios on IEX and PXIL were 19.84% and 69.80% respectively. Total traded value was Rs 353 crores*.

REConnect shifted its major volume on PXIL in a timely manner this trade session due to higher demand as compared to IEX.

The written submission for the case on stay of trading of solar RECs has been done and the judgment is reserved.

*This value is calculated considering the rate of Rs 1500 per REC out of which Rs 1000 go to the generator and Rs 500 goes to CERC

Trading of solar RECs continues to be suspended due to the stay imposed by the Supreme Court.

REC TRADE RESULTS JANUARY 2018

Non-solar demand was marginally lower than in January 2017, and also significantly than last month. However, it must be kept in mind that last month traded volumes were at a record high, and overall, this year has seen significantly higher demand.

In total 12.30 lakh RECs were traded (19.04% lower than January 2017, and 76.41% lower than in December 2017), and clearing ratios on IEX and PXIL were 7.83% and 30.55% respectively. Total traded value was Rs 184 crores*.
REConnect shifted its major volume on PXIL in a timely manner this trade session due to higher demand, resulting in higher clearing.
Trading of solar RECs continues to be suspended due to the stay imposed by the Supreme Court.
*This value is calculated considering the rate of Rs 1500 per REC out of which Rs 1000 go to the generator and Rs 500 is retained by CERC

Telangana releases draft RPO policy for the first time

Telangana State Electricity Regulatory Commission (TSERC) has released draft regulations for the compliance of Renewable Purchase Obligations for the state. These regulations are first of its kind in the state. Before this, the state was following RPO percentages determined by APERC (Andhra Pradesh Electricity Regulatory Commission) through its latest regulation.

 

Comments on these regulations are invited till 9 February 2018.

 

The RPO percentages determined in the regulation are as follows:

In the order, the RPO percentages were only given in terms of total of both solar and non-solar percentages. As per the National Tariff Policy 2016, the solar RPO percentage for states across the country shall reach 8% whereas in the mentioned order, the total RPO percentage (including solar and non-solar is 7.5% ie. 0.5% lower.

The RPO trajectory declared by TSERC as compared to that declared by MoP  for the FY 2018-19 can be seen below:

 
The draft regulation can be accessed here. The public notice can be accessed here.

REC TRADE RESULTS DECEMBER 2017

This month’s trading session saw highest ever trade in the REC markets – 2nd time in a row after the record trading session last month. Non-solar demand was significantly higher than in December 2016, and also last month. In total 52.17 lakh RECs were traded (1,136% higher than December 2016, and 136% higher than in November 2017), and clearing ratios on IEX and PXIL were 46.09% and 58.15% respectively.  Total traded value was Rs 782 crores.

The increase in traded volumes have been driven by demand from both Discom’s and captive generators. Several regulatory commissions have issued orders and notices in the recent past. This trend is expected to continue into the last quarter of the financial year.

Trading of solar RECs continues to be suspended due to the stay imposed by the Supreme Court.

DERC NOTIFIES RPO REGULATION

The DERC has released draft RPO regulations in an order dated 28/07/2017. Following are the salient features of the regulation:

 

  1. RPO Compliance:

  • Aggregate from the gross purchases from generating stations by Obligated entities shall be considered as the quantum of RE purchase for RPO compliance.

  • All the power produced from Waste-to-energy plants shall be procured by the distribution licensee. This will also contribute towards RPO compliance.

  • Quarterly reports shall be submitted by the obligated entities which will include parameters such as capacity addition, generation and purchase of electricity from RE sources. The same shall also be posted on their website.

  1. Role of SNA:

 

  • Protocol development for regular information collection from RE generating companies, obligated entities, SLDC, chief electrical inspector, ets.

  • RE procurement and RPO compliance reports on a monthly basis by obligated entities which shall also go on their websites. This shall be done by the 10th of the next month.

  • It shall also receive information on or before 30th April from captive users who are consuming electricity generated from captive generating plants about electricity consumption and purchase from RE sources.

  • The same shall be applicable for open access consumers.

This regulation isn’t very different from the previous RPO regulation which was released in October 2012.

The order can be accessed here. The public notice can be accessed here.

MP PROPOSES AMENDMENTS TO RPO REGULATIONS

The MPERC has released the Sixth amendment to Madhya Pradesh Electricity Regulatory Commission (Cogeneration and Generation of Electricity from Renewable Sources of Energy) (Revision-I) Regulations, 2010 [ARG-33(I)(vi) of 2017] on July 1st 2017. In these regulations, it has revised the RPO percentage which will be applicable to the obligated entities within the state of Madhya Pradesh. Comments are invited till 24th July. The graph below gives a comparison of the RPO percentages suggested as compared to the MoP trajectory.

 

The analysis of the previous amendment can be read here.

The regulation can be accessed here

 

ANDHRA PRADESH RELEASES RPO REGULATIONS FOR FY 2017:

The Andhra Pradesh Electricity Regulatory Commission (APERC) has release RPO percentages for the years 2017-22. The RPO percentages have increased significantly since last year. In the year 2016-17, the RPO percentages were 2% for non-solar and 1% for solar. For the year 2017-18, the percentage has been increased to 6% and 3% for non-solar and solar respectively.

This percentage is applicable on total consumption of electricity including hydro and mini-hydel. The RPO percentages given in the regulation are as follows:

 

A comparison between the MoP trajectory and the percentages for this FY is given as follows:

 

The regulation can be accessed here.

HIMACHAL PRADESH ELECTRICITY REGULATORY COMMISSION (RENEWABLE POWER PURCHASE OBLIGATION AND ITS COMPLIANCE) REGULATION

HPERC has notified Renewable Purchase Obligation and its compliance, 3rd amendment 2017 on 24th March 2017.

 

Quantum of Renewable Power Purchase Obligation (RPPO)

 

Since Himachal Pradesh mostly thrives on the energy produced through Hydropower, the state will be a beneficiary since RPO is excluded from RPO obligation as per the regulation.

The graph below shows the total and type of energy consumption by the state of Himachal Pradesh. The data has been derived from CEA Report.

 

Almost 3/4th energy of the total consumption comes from the Hydro Power. Its an added advantage for the state that RPO is exempted from the power consumed through Hydro sources, thus this in turn will reduce the cost of power from the state.

The graph below gives a comparison between the MoP recent RPO Trajectory and HPERC’s earlier RPO Trajectory:

HPERC for computing Renewable purchase obligation for a year of obligated has included  the transmission and distribution losses within the state in the following manner:

  • In case the electricity is purchased by such obligated entity from sources outside state , the electricity at state periphery shall be considered as the consumption of obligated entity

  • In case the electricity is purchased or generated from generating sources located within the state the electricity injected at the generating bus bar shall be considered as its consumption

The above given clauses are against the law of Electricity Act 2003 as for computing renewable purchase obligation total consumption has to taken under consideration excluding the transmission and distribution losses.

The Supreme Court order on RPO dated 13th May 2015 has taken into consideration the word “ Total Consumption” which also has been used in Electricity Act 2003. One can find below the reference from the act Section 86 (e):

promote cogeneration and generation of electricity from renewable sources of energy by providing suitable measures for connectivity with the grid and sale of electricity to any person, and also specify, for purchase of electricity from such sources, a percentage of the total consumption of electricity in the area of a distribution licence;

 The regulation can be accessed here.

NEW FORBEARANCE AND FLOOR PRICE FOR REC FRAMEWORK:

Summary:

  • The Honorable CERC published the final order on revised price bands for RECs which will be valid from April 1, 2017 onwards.

  • The new floor and forbearance prices are given below

 

  • This represents a drastic reduction of 71% for Solar RECs, and 33% for non-solar RECs

  • Existing inventory of RECs will not be given vintage multiplier

  • RECs that were at the verge of expiry have been given an extension
Impact on the market:

Immediate impact:

  • Overall, existing RECs projects will take a loss of Rs 1,866 crore due to reduction in the value of existing REC inventory. This represents roughly 50% of the total value of RECs. With such a significant loss, it is likely that several projects will become NPAs.

  • Reduced trading in March 31 trade session – generally, the March trading session sees high trading volumes as it is the last trading session of the compliance period. However, with the prospect of significant saving by trading in April, many obligated entities are likely to postpone trading to the next month.

Infact, this has been acknowledged and even allowed by a state regulator. See relevant order for allowing postponing of trading to an obligated entity here – http://www.mercindia.org.in/pdf/Order%2058%2042/DO-35%20of%202017-16032017.pdf

 

Long-term impact:

  • Potential (marginal) higher demand going forward – RECs prices have come down to such an extent that most captive and open access based consumers are likely to find buying RECs cheaper way of meeting RPO than buying green power. This may also apply in the case of several Discom’s, particularly in states that are power surplus. These low prices may therefore result in increase in demand of RECs.

However, it must be kept in mind that REC price reduction is always beneficial to the Obligated entities which are non-compliant as they will have an option to purchase RECs and fulfill their RPO compliance at lower prices whereas Obligated Entities who have been regularly meeting their RPO compliance will have incurred significantly higher cost. Therefore, a regularly reducing floor price actually incentivises postponing purchase of RECs, rather than meeting RPO.

Without strict enforcement and any risk of penalty, Obligated entities still have no incentive to comply. We believe that RECs demand will increase, but only to a very limited extent, as most obligated entities still don’t face any reason to comply with RPO at all.

The previous order can be accessed here and our analysis of the same can be found here.

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