OPEN-ACCESS

Non Solar RECs

As April is the first month of the compliance year FY 13-14 a low demand situation was expected in this month’s trading session. Out of 18.9 lakh RECs which were put for sale only 44,459 RECs were purchased by the obligated entities.The about 93% of the total available RECs participated in the trade session.

The market clearing price was Rs.1500/REC at both IEX and PXIL which will remain the same in the coming months also as long as the oversupply situation will continue to prevail.

 Solar RECs

The demand of solar RECs was higher than the supply. Buy bid was 3,522 and the sell bid was 3,077 out of which 2,217 got redeemed.  The number of solar projects is continuously increasing under the REC scheme which provide a good amount solar RECs in the coming months.

The price at IEX was Rs.12, 206/REC and at PXIL it was Rs.12, 000/REC.

For information on previous months trading, please visit -March 2013 Trading Report

Non-solar RECs

Demand increased substantially in March, 2013 to 431,054 from 155,186 in February (an increase of 177.7 %). This was also the highest volume cleared in the financial year. March was the last trading session for the compliance period 12-13, and hence the increase did not come as a surprise. However, thanks to the significant over-supply build over the last several months, prices remained at floor despite the rise in demand.

Total buy bids were at 431,054, while sell bids were 1919432. Clearing ratios on both exchanges improved, and were at approx. 25% on IEX and 20% on PXIL.

Solar RECs

The solar REC market remains buoyant.

Prices hit the ceiling level of 13,400 on IEX and were at 13,000 on PXIL. Demand was at an all time high, while supply continues to increase slowly. Total demand was 7610 while supply was 3816.

For information on previous months trading, please visit - February 2013 Trading Report

See these results in our dynamic market tracker (Beta version)

Non-solar RECs

Demand decreased to 153,000 RECs (down 21% from Jan 2013) this trading session. The compliance period for this financial year will end in March 2013, leaving only one more trading session to go. Given that, the overall demand remains very disappointing. As we have mentioned earlier, till stronger enforcement kicks-in, demand is likely to remain lackluster.

Over 17,42,000 RECs were bid for sale (no change from last month). The significant oversupply situation continues to persist, despite the increase in demand.

3.5 lakh RECs were not bid for sale in the trading session. This represented 17% of the total available RECs.

Prices remain at the floor price (Rs 1,500/ REC) for the seventh consecutive month. Clearing ratio on IEX was 3.3% and on PXIL was 48.7%.

Solar RECs

The situation is more cheerful in the solar REC market.

Demand reduced to 6,777 from the high of 42,000+ last month. Last month saw a significant rise in demand as the compliance year comes to a close. However, given the small capacity in the solar REC market at present, demand remains significantly higher than supply.

Supply of solar RECs was at 2,700 (down 23% from January; possibly due to lower issuances in February – in January 3,300 RECs were issued while only 1,900 were issued in February).

Price remained constant at IEX at Rs 12,500 while it increased to Rs 13,000 on PXIL.

See these results in our dynamic market tracker (Beta version)

Non-solar RECs

Surprisingly volume decreased ( – 29% compared from last month) at beginning of the fourth quarter of compliance year ( in December volume went up by 108% increase). The total volume cleared was only 1,93,337 leaving an inventory of 17.8 lakh RECs.

Supply on the other side continued to increase. The total sell bids at both the power exchanges was 17.4 lakh RECs (up 20 % from last month).

Prices remained at the floor prices i.e at Rs.1,500/REC . Clearing ratios were approximately 15 % in IEX and 0.7 % on PXIL (last month was 22 % and 17.5% respectively).

Solar RECs

The cleared volume of Solar RECs was 2308 ( 1208 in December). The only consolation that today’s trade session provided was the rise in demand for Solar RECs. Compared to last month, the demand for Solar RECs increased by whopping 182 times.

Market clearing price at IEX and PXIL were discovered at Rs 12,500/REC.

Non-solar RECs

Volume increased significantly from the lows of November. Total traded volume was 273,644 in December (up from 132,352 in November; 108% increase).

Supply continued to increase. Total sell bids exceeded 14.5 lakh RECs (up 18% from last month). The demand-supply gap remains a significant worry, despite increase in demand this month.

Prices remained at the floor level for the fifth month. However, higher demand meant that clearing ratios improved slightly.  Clearing ratios were 22% in IEX and 17.5% on PXIL (last month was 8% and 25% respectively).

Solar RECs

Demand and supply reduced from last month and prices varied slightly.

Clearing price at IEX was Rs 12,620 and on PXIL was Rs 12,100. There appears to be significant latent demand for Solar RECs (as seen in June and July), but the actual demand tracks available RECs closely.

Non-solar RECs

Volumes reduced sharply and prices remained at floor price for the third month.(Rs.1500/REC at IEX and PXIL; from September). Only 1.32 lakh RECs were redeemed this month (down by 41% from last month). The total supply was more than 12.3 lakhs (up by 21% from last month).

The demand has been falling drastically due to lack of enforcement of RPO regulations by state electricity regulatory commissions. Clearing ratios were approximately 8.7 % on IEX and 25 % on PXIL.

Solar RECs

Demand reduced by 23.3% from last month (3,363 in October) as well as the supply (down by 10% from last month).

The market clearing price on IEX was Rs 12,720 and on PXIL was Rs 12,100 (last month it was Rs 12,500 on PXIL and Rs.12,680  on IEX).  The total Solar RECs cleared was 1,219 ( last month it was 1,791). Supply was unusually high last month as some projects were issued RECs for several months at a time.

Non-solar RECs

The prices remained at floor price this month (Rs.1500/REC at IEX and PXIL; this is the same in September) as supply has remained far in excess of demand. The total RECs available this month was 15 lakh out of which only 2.22 lakh RECs were redeemed  leaving an inventory of 12.8 lakh RECs .

10 lakh RECs were bid for sale ( up by 42 % from last month) while demand was for only 2.22 lakh RECs (down 16 %).

Demand has remained low in the last couple of months. The major reason slow progress on enforcement by SERCs. Clearing ratios were approximately 30% on IEX and 70% on PXIL.

Solar RECs

Demand went up by 82%  from last month whereas the supply also went up by 15%. The market clearing price on IEX was Rs 12,680 and on PXIL was Rs 12,500 (last month it was Rs 12,900 on PXIL and Rs.12,500  on IEX). In total, 1,791 Solar RECs were sold (last month it was 1,160)

Coverage of October trading session in the Hindu can be accessed here, at Bloomberg here and in Business Standard here.

We have highlighted the problem with enforcement regularly. A recent article in Businessworld brings the issue center-stage.

Jayant Deo, former MD and CEO of the Indian Energy Exchange (IEX) is quoted as saying:

” [obligated] entities are getting away with non-compliance because of poor enforcement of regulations and the lack of any penalties. With state discoms being allowed to renege on obligations, many expect private players to follow suit”

The recent demand-supply gap in the September 2012 trading session and the inventory that is building up is starting to worry project developers and potential investors in the renewable space. Vibhav Nuwal of REConnect Energy is also quoted in the article:

“70–80 per cent of the demand comes from the private discoms. The remaining come from captive and open-access consumers,” says Vibhav Nuwal, director at REConnect Energy, the largest trader in this market. Although, Nuwal says, the solar REC market, which began trading in May 2012, is too small and volatile to draw inferences from; he acknowledges the widening demand-supply gap in the non-solar segment.

Non-solar RECs

Prices remained at floor price this month as supply has remained far in excess of demand. The over-supply situation has persisted for the last few months – this month 7.11 lakh RECs were bid for sale (up 13% from August), while demand was for 2.64 lakh RECs (down 6.7%).

Demand has remained depressed due to enforcement concerns. As a result, the demand-supply is continuing to widen. RECs issuances have been robust but demand has been growing slowly.

Demand is a function of RPO enforcement expectations. Recent court rulings in this will help but we do not expect its effects to be visible in the market for a few months.

Cleared volume at IEX was 239,364 (Aug – 248,168; down 3.5%) and at PXIL was 25,082 (Aug – 25,725; down 2.5%)

Solar RECs

Demand decreased from last month (from 2,331 to 1,852; down 21%). On the other hand, RECs bid for sale increased significantly as more solar capacity was commissioned (1621 vs 550; up 194%). The market clearing price on IEX was Rs 12,500 and on PXIL was Rs 12,900 (last month it was Rs 12,850 on both exchanges). In total, 1,160 Solar RECs were sold (last month it was 379).

Total market value exceeded Rs 41 crore, of which Rs 1.46 crore were from Solar RECs.

The Hindu Business Line’s coverage on the REC trading quoted Vishal Pandya , Director, REConnect Energy Solutions “Not many buyers turned up for the trade session this month. Two quarters are over and we are yet to see a larger level of participation from obligated entities,”

Prices crashed to Rs 1,500 on IEX and Rs 1,555 on PXIL; a fall of 25% and 29% respectively over last month. This price fall was driven by a significant over-supply situation – close to 6.27 lakh RECs (33% increase from July) were bid for sale while demand was 2.83 lakh (76% increase; but there’s more to the story – see below).

Demand increased this month compared to July 2012. July had witnessed a steep fall (July demand was 161,000 while in June it was 350,000). The increase this month can be attributed to renewed interest by buyers due to expectation of a price drop as the oversupply situation developed.

Despite a comeback by buyers, there as a large demand-supply gap. Supply has been robust due to multiple factors – increasing capacity in the REC mechanism (since March 2012, over 1,000 MW capacity has been added), high-wind season resulting in good generation and cumulative issuance of Maharashtra wind RECs.

At the same time, demand has remained weak due to enforcement concerns. Till date, no state has taken any concrete action towards enforcement.

Cleared volume at IEX was 248,168 (July – 147,369; up 68%) and at PXIL was 25,725 (July – 10,851; up 137%)

We expect this oversupply situation to persist, and worsen, till enforcement actions spur buyers to act.

Solar RECs

Demand decreased from last month (from 8,754 to 2,331; down 73%). RECs bid for sale remained flat (550 vs 549). The market clearing price on both power exchanges was Rs. 12,850 (Its rose from Rs.12800 last month; up 0.4%). Only 379 Solar RECs were sold (last month it was 200).

Total market value exceeded Rs 43 crore, of which Rs 48 lakhs were from Solar RECs. This is up 34% in aggregate from previous month.

For news coverage of August trading session, see here:

• Coverage in the Hindu Business Line states: “The biggest disappointment among the renewable energy producers (who are the sellers of RECs) is that no state owned electricity distribution company has come forward to buy the certificates, although they are all ‘obligated entities’. This is due to lack of enforcement of their obligations. “Lack of participation from public Discoms and large captive power plants is the main reason behind the price crash,” said Vishal Pandya, Director, REConnect”