ESCerts trading for PAT cycle II begins, says BEE

The Bureau of Energy Efficiency (BEE) has released a notification stating that the trading of ESCerts for PAT cycle II shall begin from 27th February, 2018 and shall be held on every last Tuesday of the month. The buyers and sellers from PAT cycle 1 shall be eligible for the trading of banked ESCerts.

 

Those DCs who have not submitted the copies of Form-D and have already met their compliance in PAT cycle I have the chance to submit it to BEE through post/ courier by 31st January 2018.

ENERGY CONSERVATION BUILDING CODE 2017

Shri Piyush Goyal launched the Energy Conservation Building Code, 2017 which was developed by MoP and BEE. The code aims to optimize energy savings while keeping in mind the comfort levels of the occupants. It also aims to reduce building’s energy consumption and promote low carbon growth.

 

It has been estimated that by integrating the energy code, there will be a reduction in energy of 50%  and 30 BUs by 2030. Following are the salient features of the Energy Conservation Building Code 2017:

– Developed by BEE with technical support from United States Agency for International Development (USAID) under the U.S.-India bilateral Partnership to Advance Clean Energy – Deployment Technical Assistance (PACE-D TA) Program.

 

– Anticipated reduction in energy consumption of 50% by 2030.

 

– Equivalent to 300 Billion Units by 2030, peak demand reduction of over 15 GW in a year, savings of Rs 35,000 crore and 250 million tonnes of CO2 reduction

 

– Minimum 25% energy savings to be demonstrated by new buildings to become energy compliant. Additional improvements of 35% and 50% would lead to higher grades like ECBC Plus or Super ECBC.

 

The article can be accessed here.

THE COUNTRY SEES HIGH SAVINGS THANKS TO ENERGY SAVING SCHEMES:

An article in the Business Line quoted that savings of Rs 37,685 Cr have been brought about in the country because of BEEs (Bureau of Energy Efficiency) ‘Perform, achieve and trade PAT’ scheme. In the first cycle of the scheme, or PAT-I, 478 DCs (designated consumers) from 8 sectors invested Rs 21,517 crore. For the second cycle of the scheme, BEE has names 621 DCs from 11 sectors. The consumption is expected to be tighter in this cycle.

As per Chetan Adhikari, Vice-president of REConnect Energy, the supply of RECs is going to be very high, supply of 38 lack certificates as opposed to demand of just 14 lack. In his opinion, the price of the certificates is going to range between Rs 1,226 and Rs 3,464 a certificate (This value has been given on the basis of a detailed analysis of the prices at which ESCerts will be traded in Newsletter 61)

He also had the following view about it “Many DCs are likely to ‘bank’ their ESCerts and carry them over to the second cycle. This will help them set off against any shortfall in meeting the consumption norms. Conversely if the prices fall steeply, DCs might find it cheaper to buy the certificates rather than invest in energy efficiency.”

A detailed analysis of the PAT scheme has been done by REConnect in one off it’s blog.

CERC (Terms and Conditions for Exchange of ESCerts) Regulations, 2016xchange of ESCerts) Regulations, 2016

Background

An important part of the Perform, Achieve, and Trade (PAT) mechanism for Energy Efficiency is the ‘trading’ aspect. PAT Cycle I was completed last year and the next logical step in the process is the trading of Energy Saving Certificates (ESCerts).  For a detailed analysis of the PAT scheme, see our Newsletter  Vol. 47 January 2015.

 

The actual ‘trading’ may soon become a reality as CERC recently came out with draft regulations that will govern such trading on power exchanges. A brief analysis is below:

 

Draft Regulation:

The draft Regulations has proposed to assign the responsibilities to BEE, CERC and POSOCO:

 

BEE:BEE shall discharge the role of Administrator of ESCerts and shall provide assistance to the Commission in the matters involving exchange of ESCerts on Power Exchanges and shall coordinate with the Power Exchanges and Registry for smooth interface for Exchange of ESCerts

 

CERC : CERC would function as the Market  Regulator.  In its role as Market Regulator, the draft Regulations proposes to  approve the procedure for interface activities between Power Exchanges and Registry, Administrator and Registry, and Registry and Designated Consumer And monitor the operations and performance of Power Exchanges with regard to exchange of ESCerts ;

 

POSOCO: During the introduction of Renewable Energy Certificates ( RECs) , POSOCO was mandated to act as the Registry.  Ministry of Power has assigned the

function of Registry of ESCerts trading to POSOCO for the exchange of ESCerts on the Power Exchanges .  In its capacity as the Registry for ESCerts, POSOCO is envisaged to discharge the following important functions:

 

  • Assistance in registration process of ESCerts including crediting of ESCerts to DCs after approval from MoP,
  • Guidance on dealing in the process of ESCerts trading/ exchange
  • Coordination and information dissemination with DCs, Power Exchanges, BEE and Regulator (i.e. CERC)

 

Issuance of ESCerts:

  • The DCs would be issued ESCerts in electronic form in a cycle period for achieving specific energy consumption less than the energy consumption norms and standards notified by the Central Government for the cycle period, under Energy Conservation Rules, and subsequent cycles, who have held such certificates in Registry accounts.

 

  • The DC’s whose specific energy consumption shall be more than the prescribed energy consumption norms and standards specified for a cycle period and subsequent cycles and who wish to comply with the prescribed energy consumption norms and standards using ESCerts in lieu of implementing energy conservation and energy efficiency improvement measures shall be entitled to purchase the ESCerts to meet compliance with the norms and standards prescribed under

 

The Certificate issued to eligible entities by the Government on the recommendations of the Bureau could be transacted on any of the Power Exchanges by the ESCerts holder.

It’s important to note that BEE has proposed that ESCerts have no floor or forbearance price. Pricing will therefore be determined purely through demand and supply of ESCerts. Initial analysis suggests that there will be significant oversupply of ESCerts, leading to low prices. However, its important to note that companies have the choice to ‘bank’ ESCerts to the next cycle – this feature may have the effect of a floor price as if the trading price is lower than the cost of achieving energy savings, the company will be better off banking the certificates rather than trading them.

 

The regulation can be accessed here.

 

Preliminary Analysis of PAT Scheme

The Perform, Achieve and Trade (PAT) scheme was launched in 2012 to promote energy efficiency in energy intensive industries.  The scheme is market based where on over achieving the target, energy saving certificates (ESCerts) will be issued which will be purchased by under achievers from the power exchanges to meet their compliance. The targets were assigned to 478 energy intensive industries known as Designated Consumers (DCs) from 8 different sectors. Please refer to our past Newsletters Vol. IX “Introduction to Energy Efficiency“, and Vol. XX “Analysis of the Energy Saving Certificate” for more details.

There has been satisfactory progress in the PAT scheme so far as Bureau of Energy Efficiency (BEE) has actively pushed the scheme. The first PAT cycle (2012-15) is going to end in March 2015. The online PAT Net platform is at its final stage and consultants have been invited to review the framework for ESCerts trading.

There was a recent press release by Bureau of Energy Efficiency on the status of PAT scheme. The final verification of the energy saving done is due followed by issuance of ESCerts. The final verification and certification will be done by Accredited Energy Auditors. After the verification, ESCerts will be issued.

From the above chart we can see that demand is likely to be seen in the first cycle. With more than 50% still to meet the target, the 1st session of ESCerts market will be interesting to watch as the scheme is nascent.

Dr. Ajay Mathur, Director General of the Bureau of Energy Efficiency, said that,

“Overall, it seems likely that there would be overall compliance with the target, with some amount of trading for compliance purposes”.

The price of an ESCert will also attract the market which is variable in nature and depends upon the market price of coal, gas & crude oil. The price of an ESCerts determined by BEE for the year 2011-12 was Rs.10,154.

The trading is likely to happen between Aug and Nov 15.

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