REC Trade Result July 2016

In contrast to June 2016, which saw huge demand for both Non-solar and Solar RECs, this month trading did not fare that well.  This month trading saw a dip in the demand for both Solar and Non-Solar RECs. The demand though increased twice the amount in comparison to July 2015.  The total transaction value stood at roughly half as compared to previous month, i.e. 40 Crores as compared to 80 Crores last month.

Analysis of Trading:

Non Solar – Clearing ratio in exchange stood at 1.91% and 1.69 % in IEX and PXIL respectively for Non Solar REC’s.

Solar – Clearing ratio stood good at 1.17% and 0.97% in IEX and PXIL respectively.

The graphs are given below:

 

 

REC Trade Result June 2016

This month trading saw a huge surge in the demand for both Solar and Non-Solar RECs. The demand rose approximately 2.5 times for both non-solar and solar, while also registering good clearing ratios at both the exchanges, as compared to June 2015. The total transaction value stood at roughly 80 Crores as compared to 31.5 Crores last month.

The positive movement in demand can be attributed to the order of UERC on 20th of June, wherein they have directed all obligated entities to strictly fulfil their RPO obligation of FY 2015-16, by July 2016. This month also saw marginal fall in total REC issuance, and despite the rise in total sell bids, the market showed positive signs of recovery. We expect the other states to enforce RPO more strictly in the months to come.

 

Analysis of Trading:

 

Non Solar – Clearing ratio in exchange stood at 4.01% and 1.50 % in IEX and PXIL respectively for Non Solar REC’s. A total of 417,426 RECs were traded as compared to 161,858 RECs traded in May.

 

Solar – Clearing ratio stood good at 1.24% and 2.28% in IEX and PXIL respectively, with total clearing volume being 2.5 times of the previous month.

 

The detailed result is tabled below:

The positive movement in demand can be attributed to the order of UERC on 20th of June, wherein they have directed all obligated entities to strictly fulfil their RPO obligation of FY 2015-16, by July 2016. This month also saw marginal fall in total REC issuance, and despite the rise in total sell bids, the market showed positive signs of recovery. We expect the other states to enforce RPO more strictly in the months to come.

 

We are hopeful that the FY 2016-17 will bring good fortune to the REC market, considering the proposed regulatory changes and more stricter enforcement by states, which will bring back stakeholders confidence.

 

 

 

GERC Determines Tariff for Procurement of Power from Wind Energy Projects

Gujarat Electricity Regulatory Commission (GERC) has proposed an increase in tariff for procurement of wind power. The higher tariff is on account of a rise in capital costs of setting up a wind power project in Gujarat.

GERC has come out with a draft discussion paper on tariff fixation and has invited stake holders to file objections before June 10, 2016. According to the draft paper, the capital cost of setting up a wind power project in Gujarat increased from Rs 6.06 crore per MW to Rs 6.13 crore per MW.

The graph below gives a comparison of the wind tariff determined over the few years:

 

 

Cross Subsidy Charges, Transmission and Wheeling Charges:

1.      Cross Subsidy Charges:

According to the earlier orders, the commission had exempted third party sale of wind energy from the cross subsidy surcharge. Also  the cross-subsidy surcharge all open access transactions from wind power projects.

  • 25% of the cross subsidy surcharge as applicable to normal open access consumer shall be applicable.

2. Wheeling of power for Captive Use

a. In Case of wheeling of power to consumption site at 66 kV voltage level and above, normal open access charges and losses as applicable to normal open access consumer.

b.  In case the injection of power is at 66 kV or above and drawl is at 11 kV, normal transmission charges and losses are applicable; however 50% of wheeling charges and 50% of distribution losses of the energy fed into the grid as applicable to normal open access consumers.

 

3.Wheeling of power to more than one locations

Wind power projects owners , who decide to wheel electricity for captive use / third party sale , to more than one location, shall pay 5 Paisa/KWh on energy fed in the grid to the distribution company concerned in addition to transmission charges and losses, as applicable.

 

4. Energy Metering

  • Wind projects shall have to provide ABT compliant meters at the interface points
  • Metering shall be done at interconnection point of the generator bus-bar with the transmission or distribution system concerned. Pricing of Reactive Power
  • 10 paise/kVARh– For the drawl of reactive energy at 10% or less of the net energy exported.
  • 25 paise/kVARh– For the drawl of reactive energy at more than 10% of the net active energy exported

5.Banking of Surplus Wind Energy

As promotional measure, it is proposed to continue the banking facility for 1 billing cycle for the wind power captive projects wheeling electricity for own use.

  • For captive wind energy projects, the surplus energy after one month’s banking is considered for purchase by distribution licensee at 85% of the wind tariff.
  • For third party wind energy sale, the surplus energy after 15 minutes time block is considered for purchase by distribution licensee at the rate of 85% of the tariff declared by the Commission. The order can be accessed here.

KERC Determines tariffs and other norms for Solar Rooftop and Small Photovoltaic Power Plants

This Order is applicable to all new grid connected solar rooftop and small solar photo voltaic power plants, entering into Power Purchase Agreement (PPA) and commissioned on or after 2nd May, 2016 and up to 31st March, 2018.

Sharing of Clean Development Mechanism (CDM) benefits between the generating company and the beneficiaries

  • 100% of gross proceeds on account of CDM benefit are to be retained by the project developer in the first year, after the date of commercial operation of the generating station,
  • In the second year, the share of distribution licensees shall be 10%, which shall be progressively increased by 10% every year till it reaches 50% and thereafter, the proceeds shall be shared in equal proportion by the generating companies and the beneficiaries.

Grid Connectivity for roof-top projects

  • 1 kW to 5 kW – single phase 230 volts
  • 5 kW to 50 kW – 3 phase 415 Volts
  • 50 kW to 1 MW – 11 kV line.

Metering

  • Metering shall be in compliance with the CEA (Installation and Operation of Meters) Regulations 2006 as amended from time to time.
  • In the case of, solar rooftop PV systems connected to LT grid of a distribution company, the concept of net metering shall be adopted and the net energy pumped into the grid shall be billed.
  • In the net -metering, the consumer is paid for the net energy i.e., the difference between energy generated from solar rooftop plant and consumed by his/her installation.
  • This concept allows only surplus energy to be injected into the grid. The Commission had proposed to continue with net-metering concept for all consumers, other than domestic consumers.
  • In the case of domestic consumers, the Commission had proposed to adopt gross metering concept where the entire energy generated by the solar rooftop plant is allowed to be injected into the grid

Note – An amendment to CEA (Installation and Operation of Meters) Regulations 2006 has been issued recently, in which a new definition of “renewable energy meter” has been introduced to extend clarity to net-metering scheme.

  • If export>import, ESCOM pays generator at the tariff determined.
  • If import > export; then generators pays to DISCOM at prevailing retail tariff.

 

Applicability of Wheeling and Banking Charges and Cross Subsidy Surcharge:

For solar generators going with intra-state open-access, no wheeling/banking charges or cross- subsidy charges are to be paid.

The copy of the order can be accessed here.

REC Trade Result May 2016

May 2016 saw reduced traded volumes compared to last month and from May 2015. Generally early months of the compliance year see significantly reduced trading volumes. However, May 2015 saw high trading volume due to the Supreme Court order on RPO compliance.

Compared to last month, this month saw a reduction of demand by approximately 44.3% and 21.7%, for non-solar and solar respectively. The total transaction value stood at 31.5 Crores as compared to 113 Crores last month.

This month also saw significant rise in total REC issuance, which stood more than double of what it was last month. However, while solar issuance fell marginally, there was a steep rise in issuance of non-solar RECs. This also resulted in increased quantum of Sell bids at the exchanges.

Analysis of Trading:

Non Solar – Clearing ratio in exchange stood at 1.15% and 1.38% in IEX and PXIL respectively for Non Solar REC’s. A total of 161,858 RECs were traded as compared to 290,457 RECs traded in April.

Solar – Clearing ratio stood good at 0.61% and 0.41% in IEX and PXIL respectively, with total clearing volume falling marginally as compared to last month.

 

The graph below is a Y-o-Y graph which depicts the comparison of REC Traded from May 2014 to May 2015 and May 2015 to May 2016.

 

 

 

Maharashtra Published RPO Regulations for FY 2016-17 to FY 2019-20

Maharashtra published RPO regulations covering the period FY 2016-17 to FY 2019-20. The highlights of the regulation are:

 

  • RPO % in FY 2016-17 is 11% in total (10% non-solar and 1% solar). This will increase to 15% by FY 2019-20 (11.5% non-solar and 3.5% solar)

 

  • The regulations are broadly in line with the standard regulations of RPO across various states, except the following clauses:

 

  • RPO is no longer exempt on co-generation power. The Statement of Reasons (SOR) accompanying the regulations refers to the National Tariff Policy as a reason for removing exemption from RPO on co-gen power.

 

  • RPO is applicable only on consumption of conventional power. This is a significant deviation as the Electricity Act/ CERC/ other states require calculation of RPO on “total consumption”. By leaving out RE power from RPO calculation, Maharashtra risks providing double benefit to RE generators – it is possible that a consumer that consumes power from RE sources does not attract RPO provisions and at the same time claims offset of such RE power towards meeting RPO on conventional power.

 

  • RPO is applicable on CPPs with installed capacity of 5MW or more and open access consumers with a contract demand of 5 MVA or more. This will leave out significant open access and captive capacity form the ambit of RPO applicability.

The regulation can be accessed here.

REC Trade Result March 2016

March, being the last month of the Financial Year to fulfil the yearly RPO obligations, saw significant rise in demand in both the Solar and Non-Solar segments, as compared to the last three months. Non-Solar RECs demand almost doubled and Solar RECs demand rose by 68.45%, as compared to February. This was the result of stricter compliance and can also be attributed to the recent Ad by MNRE asking all entities to fulfil their obligation. The total transaction value stood at 213.3 Crores as compared to 119.5 Crores last month.

Analysis of Trading:

Non Solar – Clearing ratio in exchange stood at 7.65% and 8.93% in IEX and PXIL respectively for Non Solar REC’s. A total of 11, 14,319 RECs were traded as compared to 586,501 RECs traded in February. Overall, it was a good recovery in this segment, which also saw the closing Inventory come down marginally.

Solar – Clearing ratio stood good at 5.07% and 3.35% in IEX and PXIL respectively, with total clearing volume of 152,006, as compared to 90,236 last month. The recovery was good, but contrary to the Non-Solar inventory, the solar inventory showed no reduction.

 

As compared to March-2015, where the Non-Solar and Solar demand stood at 654985 and 68982 respectively, it was 70% and 120% higher for Non-Solar and solar respectively, in March-2016. However, the closing inventory for the FY stands at 13.28 million and 3.31 million for Non-Solar and Solar respectively, worth close to Rs. 3151 Crores. April-2015 trading saw huge clearance due to late fulfillment of obligations, and the same can be expected next month as well.

We are hopeful that the FY 2016-17 will bring good fortune to the REC market, considering the proposed regulatory changes and more stricter enforcement by states, which will bring back stakeholders confidence.

Jharkhand Draft RPO Regulation

The Jharkhand State Electricity Regulatory Commission (JSERC) in a recent notification has proposes its RPO (Renewable Purchase Obligation) and its compliance regulations 2016. The regulations will come into force from the date of its publication in the Jharkhand gazette and shall remain in force upto 31st March 2020.

RPO applicable to following category:

  1. Distribution Licensee
  2. Grid Connected Captive Generating plant with installed capacity of 5 MW and above
  3. Open Access Consumer having contract demand of 1 MVA or consume electricity procured from fossil fuel based generation.

The draft notification proposes the minimum percentage of its total consumption for Obligated Entities during a year is shown below:

Minimum Quantum of purchase in (% ) from renewable energy sources (in terms of energy in KwH)
Year Solar Non Solar Total
2016-17 1.50% 3.50% 5.00%
2017-18 2.25% 4.25% 6.50%
2018-19 3.25% 5.25% 8.50%
2019-20 4.50% 6.50% 11.00%

 

Apart from the RPO Targets the commission has also proposed penalty for non-compliance by obligated entity which fails to meet its compliance during any year.

Commission has proposed penalty under Section 142 of the Act and forbearance price penalty on the basis of shortfall in units and may direct the obligated entity to deposit it in separate account and provided that as directed by commission funds may be used for purchase of certificates.  Distribution licensee shall be in breach of its license if it fails to deposit the amount within 15 days of the communication and penalty will not pass through in Aggregate revenue requirement.

Commission has proposed priority for open access and connectivity within distribution system or transmission system as case may be irrespective of installed capacity for RE Projects in the state.

Comments:

  • RPO% proposed is way lower than NAPCC RPO target which is 15% by 2020.
  • Solar RPO proposed is not in line with the National Tariff Policy 2016 which has defined Solar RPO % to be 8% by 2022
  • RPO for Open Access is only proposed on conventional consumption while it should be on all consumption
  • CGP installed capacity of 5 MW must be reduced to 1 MW for RPO Applicability
  • Commission should allow existing projects to participate in REC Mechanism after three years of prior termination of PPA as defined in CERC REC Regulations.

The order can be accessed here.

MNRE Issues Notice on RPO compliance

The Ministry of New and Renewable Energy in collaboration with Government of India has made a great initiative by spreading the message about RPO and the need for its compliance through Times of India.  The Government highlights that all the obligated entities must comply with their RPO by March 15-16 since this trading session will be the last trading session of the compliance year, whose result calls for stricter enforcement by states. The Times of India’s article can be viewwd below

Key provision for Renewable Energy industry in the Union Budget 2016

The Union Budget 2016 was a mixed bag for the RE industry. The key provisions that will impact the industry are:

 

  • Reduction in accelerated depreciation (AD) on RE investment – the rate of AD will be reduced from 80% to 40% from April 1, 2017. AD has been historically an important driver of investment in the RE sector. However, off-late IPPs (who generally do not use AD benefits) have become the key driver of investment in the sector. Nevertheless, this change will reduce demand for RE investment. FY 2016-17 is likely to see a spurt in investment under AD as investors rush to complete projects before the lower rate becomes effective.
  • Increase in coal cess – Coal cess has been doubled from Rs 200/ ton to Rs 400/ ton. The proceeds from this cess fund the National Clean Energy Fund (NCEF). NCEF is used for a variety of reasons like Ganga Rejuvenation, proposed payments to states for deviation resulting from wind and solar, and is often not used at all (absorbed by the government to meet fiscal deficit targets).
  • Allocation of funds to MNRE has increased from  Rs 262 crore in FY 15-16 to over 5,000 crore in FY 16-17. These will potentially kick-start large projects.                                                                                                                                                                                                                                           * 1Article titled “Govt uses green energy fund for fiscal balancing”, dated April 21, 2015, Mint newspaper . 

    The article can be accessed here.

     

 

 

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