Review of REC Trading – May 2011 After a slow start, REC Trading picked up this month. There was a significant increase in the volume – combined volumes on both exchanges was 18,500 RECs (representing 18.5 million units). This is Read more…
The Supreme Court has dismissed the petition of MSEDCL for a stay on Open Access in Maharashtra. For those in the industry who have been tracking this issue for a while now, the Supreme Court action came quickly (only very Read more…
An important order was passed by Chattisgarh State Electricity Regulatory Commission (CSERC). Metering in the case of captive units has been an issue in claiming REC. While the CERC procedures are very clear about the requirements – need for a Read more…
Karnataka has notified draft policy on Solar Power development for the state of Karnataka. According to the drat policy, Karnataka is gearing up to install total 300 MW of additional capacity from Solar power plants (PV & Thermal collectively) in a phased manner by year 2015-2016.Of these 300 MW, 200 MW of capacity is envisaged to be purchased by Energy Supply Companies (ESCOMs) of Karnatakato meet their Renewable Portfolio Obligations (RPO) which currently stands at 0.25% for FY 2010-11. (more…)
Further to our analysis of REC trading in April, The Hindu recently covered the same, and so did Business Standard, which mentioned that the REC price declined by 61.5% in just the second trade. We agree with their comment of REC Trading needing a 'booster'. However, we believe that booster will come in the form of more frequent compliance requirement - clearly, if the obligated entity has time till March 2012 to meet the compliance requirement, why bother spending the money now? (more…)
Solar Projects are the flavour of the season. The National Solar Mission (NSM) has laid out an ambitions goal to make India the global leader in solar energy, and plans to develop capacity of 20 GW by 2020. This analysis focuses on the impact and feasibility of Solar RECs as a mechanism to finance and operate solar energy plants. As a significant number of companies and investor consider solar energy opportunities, we present an analysis of how workable solar energy plants are under the REC mechanism. Solar RPO are included in most state regulations RPO regulations in each state require fulfilling a separate Solar RPO. At present the solar RPO requirement ranges from 0% to 0.5% of total electricity consumed. It is expected to go upto 3% by 2022. At the same time, a separate Solar REC will be issued to generators who meet the eligibility criterion. These Solar RECs will have a floor price of Rs 12/kwh and a forbearance price of Rs 17/kwh. Demand for Solar RECs Our analysis suggests that Solar RECs demand will be robust. Majority of the upcoming capacity in solar energy is either through state feed-in tariffs, or though the NSM. In either case, that capacity will not access the REC market. At the same time, there will be robust demand as every obligated entity will also need to buy Solar RECs. REConnect’s analysis suggests that 2011-12 demand of Solar power for RPO requirements will be in excess of 1,300 million units* (roughly translating into 600MW of capacity). As a result, we expect Solar RECs to sell at a high price. *Calculated from CEA data : For a detailed analysis please contact us. Most state regulations provide that in the event for inadequate availability of Solar RECs, the Solar RPO requirement can be fulfilled through Non-Solar RECs. Since Non-solar RECs are significantly cheaper that Solar RECs, this can present issues in the Solar RECs markets – companies may wait for the Solar REC supply to be exhausted so that they can buy non-solar RECs for compliance, and it may result in a downward pressure on Solar REC prices. More clarity is needed on the implementation of this clause is the state RPO regulations. (more…)
India witnessed first ever trade of REC in March 2011 where 424 Non-Solar RECs got traded collectively through Indian Energy Exchange (IEX) and Power Exchange India Limited (PXIL) at Market Clearing Price (MCP) of Rs. 3900/REC and Rs. 2225/REC respectively. Market got super excited seeing REC prices touching forbearance price at IEX. However, the market got little surprise as well as shock in the very next trade session that got executed in April-2011, in which buyers were hard to find at both the Power Exchanges (PXs). Based on its existing strong hold in the market, IEX managed to get 260 Non-Solar RECs from buy side whereas their counterpart – PXIL could not get a single bid from REC buyers! This came as a little surprise to us (REConnect) as well as the market. We were expecting that the market would see a strong dip in the price due to following factors:
- Most of the distribution companies & obligated entities might still be busy settling their financial accounts (more…)
In the REC Mechanism , obligated entities like distribution licensees, open access consumers and captive consumers having Renewable Purchase Obligation (RPO), need to buy either physical renewable energy or REC to meet RPO compliance. This provision would ensure that obligated entities that are not able to procure physical renewable energy, would purchase RECs to avoid penalty. Even though, the regulatory provision has been provided for mandatory RPO compliance, as the provision being enforced for the first time in India, a question on every stakeholder’s mind is “Who will actually buy RECs?” With the RPO being enforced, it is anticipated that only distribution licensees would contribute in bringing demand for RECs in the market. However, we believe that in the initial years, they would not be the only significant buyers of RECs in the market place. This is mainly because they already buy a significant volume of green power under preferential tariffs. Further, the revised RPOs set by various SERCs are set up in such a way that the net shortfall of renewable energy for a distribution licensee to meet its RPO would very minimal. (more…)
Renewable Energy Certificate Mechanism provides few additional options to RE generators to structure their electricity sale to maximize their profit. Structuring the sale of electricity can play an important role in maximizing the benefits of a particular project. A Renewable Energy Generator can have multiple options to manage electricity sale. Each option has its own advantages and limitations. The options can be listed out as:
- Sale to DISCOM at Preferential Tariff: PPA with a DISCOM is a very basic option which can assure guaranteed ROI over a longer duration. This can be a benchmark to evaluate other options against.
- Sale to DISCOM at Average Power Purchase Cost: Sale to DISCOM at Average Power Purchase Cost can assure a guaranteed return with an additional income from GBI, but the tariff is low when compared to the preferential tariff. This drop in tariff can be compensated by additional revenue from RECs.
- Third Party Sale/ Open Access: Detailed analysis is required while going for Third Party Sale or Open Access as this may involve higher risks and other applicable charges as well. The charges may include Transmission Loss, Transmission Charges, and wheeling Charges. Cross Subsidy charges may also be eligible and will have a considerable effect on the price if implemented. The advantage with Third party Sale/ Open access is that the tariff may be comparatively higher and the generator is allowed to avail RECs as well.
- Captive/ Group Captive Consumption: Most of the states allows RE generators to consume electricity generated as a captive consumption by paying nominal wheeling and banking charges (in case of wind/small hydro). As per CERC regulation, when RE generation is used for captive consumption and promotional benefits are availed (promotional wheeling and banking), RE generator becomes ineligible to participate in REC mechanism.
As every cricket fan in India would remember March 30, 2011 for a much hyped India-Pak Cricket World Cup semi-final, all the RE stakeholders in the country might remember the same date for some other reasons. This is the day, India witnessed the first ever trade of Renewable Energy Certificate (REC) at Power Exchange platform! We are very proud to announce that REConnect partnered this landmark event in Indian renewable energy history by executing FIRST EVER trade of REC in India at Indian Energy Exchange! A brief snapshot of the total REC trades executed is summarized below:
|Indian Energy Exchange||Power Exchange India Limited||Total|
|Sell Volume (RECs) - Non Solar||150||274||324|
|Sell Volume (RECs) - Solar||0||0||0|
|Buy Volume (RECs) – Non Solar||70377||324||70701|
|Buy Volume (RECs) – Solar||30001||3025||33026|
|Market Clearing Price (Rs./REC) -Non Solar||3900||2225||3062.5 (avg)|
|Market Clearing Price (Rs./REC) -Solar||0||0||0|
|Market Clearing Volume (RECs) - Non Solar||150||274||424|
|Market Clearing Volume (RECs) - Solar||0||0||0|
|Number of Portfolios Participated||15||0||0|
As expected, REC market stared with a supply constrained scenarioand buyers almost paid scarcity price in today’s trade. The same gets reflected from the available supply and demand for REC at both the Power Exchanges viz. Indian Energy Exchange (IEX) and Power Exchange India Limited (PXIL). Following is the highlight of the REC trades that got executed at IEX and PXIL.
- This can be very well explained by Demand to Supply ratio of Non-Solar RECs at IEX and PXIL.
- Demand to Supply ratio at IEX stood at staggering 469 against just 1.18 at PXIL.
- Very high demand base at IEX and highly constrained supply resulted into high price of non-solar RECs at IEX.
- Low demand base and almost similar number of RECs available for sale at PXIL resulted into a ’moderate’ level of prices at IEX.