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”

and

“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

Analysis of Amendments Proposed in the National Tariff Policy

The Ministry of Power has proposed several changes to the National Tariff Policy. Some changes are significant, like the proposal to substantially increase solar RPO (from 3% by 2022 to 8% by 2019), to remove inter-state transmission charges on RE power and curtailing cross-subsidy to 15% of applicable tariff.

Key points in the amendments to the National Tariff Policy:

  • The SERCs and CERC shall necessarily be guided by the National Tariff Policy
  • Promotion of renewable energy has been added as an objective of the policy
  • In the tariff policy, the word ‘Non-conventional’ is sought to be replaced with Renewable energy
  • For RPO, long term trajectory to be provided by Ministry of Power (MoP), in consultation with MNRE and keeping in view the objectives of NAPCC
  • Solar RPO targets to be ramped up more aggressively – the exisiting policy provids for reaching 3% by 2022, the proposals to increase this to 8% by 2022.
  • The policy envisages a REC multiplier to differentiate between technologies, and to accommodate changes in price (through a ‘vintage multiplier’)
  • The tariff policy envisages that procurement of renewable energy, as far as possible, will be done on a competitive bidding basis. Further, “an appropriate bid-based tariff framework for renewable energy, allowing the tariff to be increased progressively in a back-loaded manner over the life cycle of such a generating plant” is planned. The back-loaded manner could imply costs are kept low at present so as to minimize cost burden on the Discom’s, to be increased over the life of the project.
  • For a new coal/ lignite based plant, RE capacity to the extent of 10% of thermal generation capacity will have to build. This will be allowed to be bundled with the conventional power.
  • No inter-state transmission charges for RE power
  • Time differentiated tariff to be implemented for large consumers (>1MW) within one year, and for all consumers within 5 years
  • In calculating the cross-subsidy surcharge (CSS) a change in the methodology is proposed. At present, cross subsidy is calculated by using the cost of marginal power (top 5% power at the margin). Instead the weighted average cost of power including transmission and wheeling losses and charges, and the cost of carrying regulatory assets is proposed to be used.
  • Further, the provision requiring gradual reduction of cross-subsidy to a maximum of 20% of its opening level is proposed to be deleted.
  • A new provision limited the CSS to 15% of the applicable tariff category has been proposed.

Conclusion –

The changes proposed in the Tariff Policy are welcome, and in line with the government’s objective to promote RE power. However, the effectiveness of the same remains a question mark. Several provisions in the existing policy (of January 2006) remain only on paper. A good example of this is the requirement that “Availability Based Tariff (ABT) is to be introduced at State level by April 2006”. In several states this still remains a distant dream 9 years after the deadline.

Similarly, the ability of reaching 8% solar RPO remains doubtful when several states did not even follow the minimum requirement of 0.25% as per the existing policy. Also, the intent and conduct of SERCs in enforcing RPO regulations has been a big question mark.

It is noteworthy that the Electricity Act 2003 says that the Appropriate Commissions ‘shall be guided’ by the Tariff Policy in tariff determination. The proposed amendment to the EA says the provisions of Tariff Policy shall be followed by the Appropriate Commission for the purpose of Tariff determination.”

The link to the main document is 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.

Non-Solar

Solar

 

Team REConnect

MERC relaxes RPO compliance for BEST

MERC had notified the Maharashtra Electricity Regulatory Commission (Renewable Purchase Obligation, its Compliance and Implementation of Renewable Energy Certificate Framework) Regulations, 2010 (‘RPO-REC Regulations’) on 7 June, 2010. As per this regulation, following are the RPO targets for all obligated entities;

Non-Solar*:  The regulation also states that, all obligated entities shall on mandatory basis, purchase from Mini Hydro or Micro Hydro power projects, to the tune of 0.1 % of Non-Solar RPO from FY 2010-11 to FY 2012-13 and 0.2% from FY 2013-14 to FY 2015-16.

BEST has fulfilled its Non-Solar (including Mini Hydro or Micro Hydro) RPO compliance cumulatively till FY 2013-14 showing a small surplus, however it has a huge shortfall of close to 59.46% in meeting its Solar RPO target cumulatively till FY 2013-14.

The commission has appreciated the suggestion of PXIL for quarterly fulfillment of RPO, but has gone ahead in stating that it is currently considering shortfalls on merit basis by allowing fulfillment on cumulative basis by the end of FY.

Earlier in Case No.181 of 2013, the commission had given BEST a relaxation by not imposing Regulatory Charges on BEST for their Solar RPO shortfall during FY 2010-11 to FY 2012-13 and had relaxed/waived Solar RPO targets for FY 2010-11 and FY 2011-12. Similarly, they have decided that Regulatory Charges shall not apply on BEST for FY 2013-14, and that all cumulative shortfalls should be fulfilled by 2015-16, i.e. by 31st March 2016.

Considering 4900 MUs to be the average consumption for BEST, for FY 2014-15 and FY 2015-16, the cumulative Solar RPO target for FY 2014-15 & FY 2015-16, including the cumulative shortfall of 36.08 MUs till FY 2013-14, should stand somewhere around 85 MUs.

For more details on the order click here.

Rec Trade Results March 2015

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

  • Solar RECs – Overall market clearance remained optimistic this time, with good demand at PXIL and overall good clearance at both the exchanges. Demand rose from close to 44,869 last month to 68,982 this time, albeit the huge inventory still left to be carried over to the next FY. Market clearing ration also improved significantly over previous month, but not convincing as compared to March 2014, where the clearing ratio was 7.37%.
  • Non Solar REC market unexpectedly dipped from 747,487 last month to 654,985 RECs this month due to some states allowing carry forward of RECs to next FY. The clearing ratio was good, but considering that in March last year it was 12.03%, it was significantly lower. Inventory continues to pile up, and has reached an overwhelming figure of close to 10.5 million.

Comparing trading volumes this quarter with the corresponding quarter last year provide a better picture of the REC markets. In the last quarter of FY 2013-14 approximately 13.5 Lakh REC’s were redeemed whereas this quarter of FY 2014-15, approximately 20 Lakh REC’s have been redeemed  - an increase of approx. 48 %.

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

Non-Solar RECs

 

Solar RECs

 

REConnect Energy is the market leader in the REC Market in India, with 36% market share and a portfolio of over 3 GW RE. We have been recently acknowledged with the REC Trader of the Year 2014.

Team REConnect

REC Trade Results Feb 2015

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

  • Solar RECs – Overall market clearance remained optimistic this time, with steep rise in demand at PXIL and overall good clearance at both the exchanges. Demand rose from close to 30000 last month to 44,869 this time, albeit the huge inventory waiting to be cleared.
  • Non Solar REC market also showed good signs of improvement with total of 747,487 Non-Solar RECs getting cleared in today’s trade session, compared to 537,009 in the last trading session.

Detailed trade results are tabled below for your kind reference.

Non-Solar RECs

Solar RECs

REConnect Energy is the market leader in the REC Market in India, with 36% market share and a portfolio of over 3 GW RE. We have been recently acknowledged with the REC Trader of the Year 2014.

Team REConnect

 

 

REC Trade Results – January 2015

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

  • Solar RECs – Overall market clearance remained low at PXIL in Solar whereas IEX reflected a good clearance ratio in Solar Market. Steep hike in demand for Solar at IEX can be attributed to reduced price of Solar RECs.
  • Non Solar REC market showed some signs of improvement with total 537,009 Non-Solar RECs getting cleared in today’s trade session.
    • While the demand looks improving owing to compliance year end approaching, hon’ble GERC(Gujarat Electricity Regulatory Commission) showed leniency on DISCOMs in Gujarat to adjust surplus solar RECs with non-solar RECs and also allowed reduction in total RPO targets for FY13-14. Detailed analysis can be read here.

Detailed trade results are tabled below for your kind reference.

Non-Solar RECs

Solar RECs

REConnect Energy is the market leader in the REC Market in India, with 36% market share and a portfolio of over 3 GW RE. We have been recently acknowledged with the REC Trader of the Year 2014.

Team REConnect

GERC Maintains Leniency over RPO Compliance

The Gujarat Electricity Regulatory Commission (GERC) in its orders Dated 16th Jan 2015, has given relief to the state distribution companies against their RPO compliance for the year 13-14. The summary of the GERC orders is given below:

 Orders on GUVNL: GUVNL complied with 5.26% out of 6% obligations for non-solar and achieved 2.18% of Solar against 1% obligation. But overall attained a renewable purchase level of 7.44% against the RPO of 7%. Highlighting this the GUVNL requested before the commission to adjust its excess solar energy purchased into the non-compliance in the Non-solar part. While the Indian Wind Energy Association (IWPA) objected saying that this would result in loss for the wind generators as there is huge amount of Non-solar REC’s available for purchase.

 The commission in its order granted the permission for adjusting the excess purchase by GUVNL from Solar against the wind and other category compliance saying that the solar energy is costlier than the Non-solar energy and further more purchase of non-solar renewable would result in an additional burden on consumers of the distribution licensee.

Order on MPSEZ Utilities – MPSEZ Utilities submitted that it is having a revenue gap and therefore the enforcement of RPO on them will further burden the deemed licensees of SEZ areas. The commission in the order said that looking to the nascent stage of operation of the deemed distribution licensees of SEZ and quantum of power requirement by them for fulfillment of RPO, which is very less, so the commission exempted the licensee from applicability of RPO for FY 13-14.

 Order on Torrent Power ltd. – Torrent power submitted that it has complied with RPO of 4.55% in case of Non-solar against total 6%, and solar RPO of .07% against 1% in the regulation. Saying that due to non-availability of Renewable Energy and factors beyond control, which lead to shortfall in RPO compliance for FY13-14. And requested before commission to revise the RPO percentage of FY 13-14 to the actual targets achieved by the company. IWPA in its submission said that the distribution company had the option of redeeming REC’s from exchange, as huge no. of solar and non-solar REC’s are available for sell.

 The commission in the order said that the petitioner has made sufficient efforts to fulfill the solar and non-solar energy and REC’s as well, also said due to non-availability of renewable energy and factors beyond controlled resulted in shortfall in RPO compliance. And said that any further purchase of REC’s will result in the burden for consumers hence we cannot force the petitioner to buy more REC’s. The commission ordered to revise the RPO of the petitioner company as non-solar RPO at 4.55 % and Solar RPO at 0.07 % for FY 2013-14.

 The decision of GERC to allow the defaulted distribution companies, adjusting their non-renewable RPO with their excess solar energy, and waiving off RPO for Deemed Distribution licensees (Torrent Energy Ltd and MPSEZ Utilities Pvt. Ltd.), and also reducing RPO to match the extent of sourced energy, will adversely impact the REC market which is going through a bad stage.

 These steps even though appear to be practical may give other states chance to be more lenient over RPO enforcement, which could result in effecting the renewable industry badly as they rely on strict RPO enforcement. The step of giving solar power beneficial treatment over other RE power could be discouraging to other RE generators. May be the stagnancy in the REC market is the result of domino effect started by GERC and some other regulatory commissions.

The GERC Order on GUVNL & MPSEZ can be accessed here, and the order on torrent power can be accessed here.

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