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.

RPO COMPLIANCE TO DRIVE THE COUNTRY TOWARDS RENEWABLE ENERGY GROWTH:

In an article in the Economic Times, the importance of RPOs has been highlighted by saying that RPOs are the most important instruments towards achieving the lofty goal of installing 175 GW of renewable energy by 2022. Last year, the Ministry of Power had declared the National RPO Trajectory but not much was complied with. As per the CEO of Mercam Capital Group, a number of issues need to be addressed in order to make sure that RPOs are complied with such as evacuation issues, DISCOM financials, etc. The government needs to provide a conducive environment for renewable installations to thrive. In some cases, it has so happened that the state electricity regulatory commissions have allowed a carry forward of the shortfall of DISCOMS which one of the reasons for non-compliance.

On the other hand, it can also be said that a number of changes are being made from the government’s side as well to make sure that RPOs are complied with. A new policy has been introduced in which it is estimated that solar RPO will be 8% by 2022. Also, it also mandates the DISCOMS to procure 100% power from waste to energy projects. The World Bank as well as some other banks are providing financial support so as to increase the number of renewable energy installation in India.

In the last trading session, a huge gap was seen in the number of solar and non-solar RECs traded. Now, with the reduction in floor and forbearance prices of RECs by Central Electricity Regulatory Commission, compliance towards RPOs may get further delayed.

REC Trade Results January 2017

This month’s trading saw a remarkable turnaround with respect to the overall Non solar REC clearance. The clearance ration stood at a shooting high of 10.8% for non solar. The demand for solar REC saw marginal improvement in respect to the month of December. The total transaction value stood at 244.7Crores in comparison to 74.4 Crores last month.

Analysis of Trading:

Non Solar – The clearing ratio stood at 13.5% and 5.7% in both IEX and PXIL, with a drastic increase of 260% in the no. of REC’s traded as compared to last month.

 

 

Solar – Clearing ratio stood at 1.2% and 0.7% in IEX and PXIL respectively, with a significant increase of 49% in total demand of Solar RECs as compared to December.

 

CERC Determines fees for issuance of Renewable Energy Certificates

In a recent amendment in the Regulation 11 of the REC Regulations, CERC determined the fees and charges payable by the eligible entities for participation in the scheme for, registration, eligibility of certificates, issuance of certificates, and other matters connected there with.  Following are some of the highlights of the regulation:

 

a)      Fees and charges other than those for issuance of certificates would be continued as they are at present until further orders.

 

b)      The fee for issuance of certificate for the period from 22.4.2013 till the date of issuance of next order by the Commission was determined at the rate of Rs 10/certificate.

 

c)      The fee for issuance of certificate for the period from 1.4.2015 till the date of issuance of next order by the Commission was to be regularized at the rate of Rs 4/certificate.

 

d)      The fees for issuance of certificate for the period from 1.1.2017 until further orders is determined to be Rs 2/- per certificate.

 

The regulation can be accessed here.

REC Trade result December 2016

This month trading saw good results with respect to the Non solar REC clearance overall. The demand for solar REC saw marginal improvement in respect to the last month. The total transaction value stood at 74.4 Crores in comparison to 53.6 Crores last month.

This month saw fall in the total issuance where the demand decreased by 4.60Lakhs in comparison to November. Though there had been significant increase in the total REC issuance due to the impact of CERC’s 4th amendment to RECs regulations.

Analysis of Trading:

Non Solar – The clearing ratio stood at 3.19% and 2.81% in both IEX and PXIL, with a significant increase of 61% in the no. of REC’s traded as compared to last month

Solar – Clearing ratio stood at 0.85% and 0.53% in IEX and PXIL respectively, with a dip of 23% in total demand of Solar RECs as compared to November.

 

 

 

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