REC Trade Results February 2017

The Feb trade session remained a robust one, following the record setting session in January.  Total Non-solar demand was 10.4 lakhs (vs 15.2 L demand in January), and clearing ratios on IEX and PXIL were 8.7 and 6.2% respectively. On a year-to-date basis, this year Non-solar RECs demand has been significantly higher than last year. March 2017, which will be the last trading session of FY 16-17, is also expected to result in high trading volumes.

 

Solar RECs trading, on the other hand, has remained subdued. One reason is the significantly solar capacity coming online in states (with record low tariffs) – this result in Discom’s not buying solar RECs in large volumes. Also, the expected price drop in April 2017 may be resulting in potential buyers deferring purchases.

 

Non Solar – The clearing ratio stood at 8.72% and 6.2% in both IEX and PXIL respectively.

Solar – Clearing ratio stood at 1.26% and 0.34% in IEX and PXIL respectively.

 

 

 

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.

 

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.

 

 

 

REC Market demand & supply forecast for FY 16-17

Every year, around the mid-year mark we forecast the demand and supply in the RECs markets for the remain-der of the financial year. The second half of the FY is the busy period for the RECs markets as most transactions take place in this period. As an example, of the 43 lakh non-solar RECs sold last year, 9 lakh were sold between Apr – Sept 2015 and 34 lakh were sold from Oct 15 – March 2016 (21% and 79% split between the two halves of the year).
FY 16-17 is characterized by several changes in the RECs markets :-

  • Significantly higher demand compared to same pe-riod last year for Non-solar RECs (non-solar RECs de-mand is up by 51% compared to the same period last year, ie April to November)
  • Drastic reduction in RECs issuances due to impact of CERC’s 4th amendment to RECs regulations
  • Impeding price change in the short term (April 2017) particularly for solar RECs
  • Changing regulations in light of the national tariff policy (NTP). This will result in much higher RPO and removal of exemption for co-gen. However, due to inconsistencies in the NTP with the Electricity Act 2003 we expect the impact of these changes to be visible only in the next FY.

Overall, we expect demand to remain robust for Non-solar RECs (but not for Solar RECs). Increased demand, combined with significantly lower issuances of RECs will result in much improved clearing ratio for projects that are holding RECs.
Demand Comparison
As mentioned above, demand for non-solar RECs has been robust compared to the same period last year. As of Novem-ber, demand is up by 51% compared to the same period last year.
We expect this trend to continue, driven by several factors –

  • Several regulatory commissions have given out orders for RPO compliance during the year – this is likely to result in significant demand in the coming months. Notable examples are Maharashtra and Kerala.
  • Private Discom’s, which are large buyers, have so far re-mained marginal participants in the market. This is expected to change in the coming months.
  • CPP and open access consumers will continue to be ma-jor buyers, with several new participants coming into the market in the coming months.

Demand for Solar RECs this year compared to the same pe-riod last year has been down by 1%, or essentially the same. However, we believe that by end of FY 16-17, there is a pos-sibility that the total demand totals less than that of the pre-vious year.

This is because the current floor prices are valid only till March 31, 2017. The general expectation is of a small correction in the price of Non-solar RECs and a signifi-cant correction in the price of solar RECs. Besides this, the vintage multiplier (of 2.66x) currently in place will also expire. This may result in

(a) Significant price reduc-tion of Solar RECs,

(b) a major jump in S-RECs inventory as existing S-RECs are adjusted to the new price, and

(c) drastic reduction in S-RECs issuance from April 2017 on-wards.
These changes in the near future make market forecast-ing for solar RECs a perilous task. Our approach assess demand in the same basis as mentioned above, but moderates it by a significant factor as closer to March obligated entities are expected to hold off purchases till new prices take effect.

RECs Supply
Two factors have resulted in reduced supply of RECs :-

 

  • Several projects have existed the RECs mechanism in favor of green power sale/ state tariff PPA or captives as RECs are no longer a viable mechanism
  • Impact of the 4th amendment to RECs regulations by CERC

As a result, Non-solar RECs issuance is down by 38%  compared to the same period last year, and Solar RECs issu-ances down by 41%. Going forward, we expect the non-solar RECs issuance to remain subdued compared to last year (as a big impact of the 4th amendment has been on sugar co-gen project which see issuances starting from November to April or May). For the full year FY16-17 we forecast Non-solar RECs issuance to be 35% below the last year number. The reduction in Solar RECs issuance is due to higher issu-ance last year as a result of solar vintage multipliers, and time-lag this year as the documentation related to 4th amendment is completed. Overall, we expect the year to end with roughly 30% lower issuance compared to last year.

Demand and supply
We have forecast demand under three scenarios –

(1) Base case – demand from states that have enforced RPO in the past or have current orders for RPO enforcement are in-cluded. Even for such states, a probably of demand material-izing is applied to the total RPO gap;

(2) Medium enforce-ment – expected demand from states that have on-going RPO assessment are added to the demand in scenario 1;

(3) High enforcement – this scenario envisages that most states will take some action towards RPO enforcement. Under this scenario, even those states that have not enforced RPO regulations till date are expected to initiate action, albeit the expected demand from such states is moderated by assign-ing a low probability (20-30%).

Conclusion:

Looking at the overall picture after the demand-supply forecasting exercise shows the following:

  • Non-solar RECs markets are showing a significant improvement. Demand is up by 51% compared to last year, and this year may become the first one in which demand exceeds issuance during the year. This is a major development towards the revival of the RECs markets.
  • Solar RECs market however is lagging behind. Demand has failed to increase this year, and may actually be lower than last year. This is driven primarily by expectation of drastic price decrease in April 2017. Only possibility of this scenario changing is if a large demand comes Discom’s.

 

Uttarakhand Electricity Regulatory Commission (Renewable Power Purchase Obligation and its Compliance)

The Ministry of Power (MoP) had recently declared the national RPO trajectory.  The order had enlisted the yearly RPO trajectory for both non-solar and solar power purchase from 2016-17 till 2018-19. Following the steps of MoP RPO trajectory and other states Uttarakhand has also notified its amendment to the Renewable Power Purchase Obligation and its Compliance, regulations.

The regulation will be applicable to:

  • The distribution licensee
  •  Or any person, consuming electricity procured from conventional sources through open access third party sale,
  • Or person who installs Captive Generating Plant, with an installed capacity exceeding 5 MVA, requirements also.

The table below shows the Minimum Quantum of Purchase in percentage (%) from renewable sources (in terms of energy in kWh) of total consumption:

The said obligations will be applicable on total consumption of electricity by an obligated entity, excluding consumption met from hydro electric sources of power.

Analysis:

  • RPO to be applied on co-generation power
  •  Consumption from hydro sources to be excluded
  • RPO % is proposed to increase steeply – from 11.50% in 2016-17 to 14.25% in 2017-18 line with the MoP Trajectory. However, in effect the overall RPO of the UK will fall as 70% of the power consumed in the state comes from hydro sources.
  • In year 2013, UERC had come up with a five year long RPO Trajectory ranging from 6.05% (including both solar & non solar) in 2013-14 to 10.50% in 2017-18. The commission now proposes to increase its RPO target in comparison to its earlier trajectory, though the commission has not defined the RPO% FOR 2018-19 unlike other states. The graph given below gives a comparison between the MoP recent RPO Trajectory and UERC’s earlier RPO Trajectory.

Since Uttarakhand mostly thrives on the energy produced through Hydro Power, the state could 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 Uttarakhand. The data has been derived from CEA Report.

Joint Electricity Regulatory Commission (Renewable Power Purchase Obligation and its Compliance)

The Joint Electricity Regulatory Commission (Goa and UT’s) recently came up with its long term Renewable purchase obligation trajectory and compliance regulation, following the footsteps of states like Chhattisgarh, HP and AP. JERC has declared its RPO Trajectory up to 2022 with total RPO of 17% which lags behind in comparison with MoP RPO Trajectory and of other states.

Just like other states, the said obligations will be applicable on total consumption of electricity by an obligated entity, excluding consumption met from hydro electric sources of power. The graph below gives comparison of MoP RPO Trajectory with JERC RPO Trajectory:

 

The JERC Regulation can be accessed here.

 

 

 

Andhra Pradesh Electricity Regulatory Commission (Renewable Power Purchase Obligation and its Compliance)

The Ministry of Power (MoP) had recently declared the national RPO trajectory.  The order had enlisted the yearly RPO trajectory for both non-solar and solar power purchase from 2016-17 till 2018-19. Following the steps of MoP RPO trajectory, Chhattisgarh, Himachal Pradesh and now Andhra Pradesh has notified its Renewable Power Purchase Obligation and its Compliance, regulations which will be effective from April 17, 2017.

The regulation will be applicable to:

  • The distribution licensee
  •  Or any person, consuming electricity procured from conventional sources through open access third party sale,
  • Every consumer owning a captive generating plant of installed capacity 1 MW and above and synchronized with the Grid.

 

The table below shows the Minimum Quantum of Purchase in percentage (%) from renewable sources (in terms of energy in kWh) of total consumption:

 

The said obligations will be applicable on total consumption of electricity by an obligated entity, excluding consumption met from hydro electric sources of power.

 

Analysis:

  • RPO to be applied on co-generation power
  • The distribution licensees shall compulsorily procure 100% power produced from all the Waste-to-Energy plants in the State, in the ratio of their procurement of power from all sources.
  • The Consumption from hydro sources to be excluded
  • RPO % is proposed to increase steeply – from 11.50% in 2016-17 to 17% in 2018-19 line with the MoP Trajectory.
  • The graph given below gives a comparison between the MoP recent RPO Trajectory and APERC’s RPO Trajectory

The regulation can be accessed here

Himachal Pradesh Electricity Regulatory Commission (Renewable Power Purchase Obligation and its Compliance) Regulations

The Ministry of Power (MoP) had recently declared the national RPO trajectory.  The order had enlisted the yearly RPO trajectory for both non-solar and solar power purchase from 2016-17 till 2018-19. Following the steps of MoP RPO trajectory, Chhattisgarh and now Himachal Pradesh have notified its third amendment to the Renewable Power Purchase Obligation and its Compliance, regulations.

The regulation will be applicable to:

  • The distribution licensee
  •  Or any person, consuming electricity procured from conventional sources through open access third party sale,
  • Or person who installs Captive Generating Plant, with an installed capacity exceeding 5 MVA, requirements also.

The table below shows the Minimum Quantum of Purchase in percentage (%) from renewable sources (in terms of energy in kWh) of total consumption:

The said obligations will be applicable on total consumption of electricity by an obligated entity, excluding consumption met from hydro electric sources of power.

Analysis:

  • RPO to be applied on co-generation power
  •  Consumption from hydro sources to be excluded
  • RPO % is proposed to increase steeply – from 11.50% in 2016-17 to 17% in 2018-19 line with the MoP Trajectory. However, in effect the overall RPO of the HP will fall as 77% of the power consumed in the state comes from hydro sources.
  • In year 2011, HPERC had come up with a ten year long RPO Trajectory ranging from 10% (including both solar & non solar) in 2011-12 to 19% in 2021- 22. The commission now proposes to increase its RPO target in comparison to its earlier trajectory. However, in 2016-17, RPO % is will be reduced. The graph given below gives a comparison between the MoP recent RPO Trajectory and HPERC’s earlier RPO Trajectory

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

 

As the graph indicates HPERC has increased its RPO target by 2.25% to be achieved by 2018-19. Since Himachal Pradesh mostly thrives on the energy produced through Hydro Power, the state could 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 regulation can be accessed here.

The CEA Report could be accessed here

 

Madhya Pradesh Electricity Regulatory Commission (Cogeneration and Generation of Electricity from Renewable Sources of Energy) (Revision-I)

Madhya Pradesh Electricity regulatory Commission (MPERC) recently ordered amendment for its Cogeneration and Generation of Electricity from Renewable Sources of Energy Regulation 2010.

The new amendment has defined the minimum quantum of electricity to be procured by all the Obligated Entities from Co-generation from Renewable Sources of electricity expressed as % of their total annual procurement of Electrical Energy.

The new amendment has excluded consumption met from hydro sources of power during the following Financial Years given as under:-

 

As the Ministry of Power (MoP) declared the national RPO trajectory recently, all the states are expected to declare their RPO trajectory soon.

The MPERC Draft can be accessed here.

REC Trade Result September 2016

The month of September trading saw significant decrease in the demand for both Solar and Non-Solar RECs as compared to last month. The total transaction value stood at 37.5 Crores in comparison to 52 Crores last month.

Analysis of Trading:

Non Solar – The clearing ratio stood at 1.36% in both IEX and PXIL for Non Solar REC’s.  A total of 1, 75,525 RECs were traded this month as compared to 2, 58,891 RECs traded in last month, a decrease of 32%.

Solar – Clearing ratio stood at 0.8 % and 0.98% in IEX and PXIL respectively, with significant decrease of 20% in total demand of Solar RECs as compared to last month.

 

 

 

In contradictory to the total demand, this month also huge rise in the total REC issuance where the issuance increased by more than 5 lakhs as compared to the past month’s total issuance. This could be attributed due to the impact of CERC’s 4th amendment to RECs regulations.

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