Delhi discoms request to waive RPO of FY13

Delhi discoms have requested to DERC, to waive RPO targets of FY13. This request was put forward by discoms in their respective ARR petitions for FY15. The discoms contend that RPO regulations were introduced in Delhi only in October 2012 and as such there was little time in that year to meet the targets. The request can be read as (Petitioner – Delhi discom)-

“In this regard the Petitioner would like to submit that since the Regulations were issued in the mid of FY 2012-13 and the Renewable Energy Generation in Delhi was not fully developed, it was not possible to meet the RPO Targets during FY 2012-13. The Petitioner appreciates the fact that the energy generation through Renewable Energy Sources is required to be promoted by achieving the RPO Targets but at the same time the Renewable Energy Sector is also required to be developed in Delhi for fulfilment of RPO. The Petitioner has invited competitive bids for procurement of Renewable Power for both Solar and Non-Solar plants. The details about the bidding process and shortlisted bidders have already been submitted to the Hon’ble Commission. The Hon’ble Commission would appreciate the fact that RE Generation in Delhi is at nascent stage and will gradually develop in the coming years. The Petitioner in the meeting with the Hon’ble Commission held on October 9, 2012 also highlighted the difficulty in mobilising resources to meet the RPO announced by the Hon’ble Commission.”

Delhi discoms BYPL and BRPL mde reference to MERC’s order dated 7th August 2009, where the RPO targets from FY08 to FY10 were exempted due to shortfall in projected RE capacity addition.

While it is left on DERC to decide on this matter, any decision in favour of the request would further dent the ongoing positive enforcement efforts in other states.

The ARR petitions are available on DERC’s website.

Our recent blog-post highlighting projections by discoms for meeting RPO of Fy15 can be read here.

Relevant media article – Times of India.

MERC tightens RPO compliance & prevents interchangeability

In a landmark decision by Maharashtra state electricity regulatory commission, it was brought forward that the obligated entities of the state (i.e. DISCOMs, Captive and OA consumers) will no longer have the cushion of RPO waiver or interchangeability of solar and non-solar RPO. Hon’ble commission has strongly asserted that all obligated entities in the state will have to meet their RPO targets (cumulatively) before March FY14, which means that all RPO targets from FY11- FY14 will have to met after clearing all previous backlogs.

Such a decision is a good sign for the overall good of REC market, which has already shown signs of increased demand in the last trading session. (For details on volumes follow REC Trading Report – July 2013). The market is expected to conduct trading in August 2013 with an inventory of around 30 lakh plus RECs. If more such decisions from other state regulators are put in place, it eventually will pick RECs from its hitherto floor price. Relevant article in the Economic Times can be read here.

In another decision, the commission proscribed the interchangeability of solar & non-solar RPO. The commission while taking a decision on the petition submitted by Reliance Infrastructure Ltd. (D) referred to discussion of 33rd FOR meeting in which the later deemed such a move as undesirable. The meeting had concluded that interchangeability will put a lot of burden on obligated entities and will in-turn affect consumers with undue cost burden.  RIL had petitioned that since it was unable to comply with non-solar RPO targets, it must be allowed to procure the surplus solar power available to offset the same. The commission responded that such a case is possible only when solar power reaches grid parity. It also highlighted that such a move will also adversely affect the growth and penetration of other renewable energy sources.

The order copy can be found here.

Regardless of varied stakeholder sentiments, both these decisions can be rightly called as a step forward towards promoting more renewable energy in India.

Article in The Guardian

REC Trading Report – February 2013

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)


Gloomy weather over REC market

Last month’s REC trading session has brought the REC market on the verge of vanishing soon. With no sign of strict enforcement happening and a drop of 40% demand shows that the obligated entities have the least interest to participate in the REC market. Those who were purchasing RECs have taken a step behind and are hesitating to purchase RECs to meet rest of their obligation. This has shattered the confidence of all the investors on the REC scheme and has put forward a very big question on the Indian regulation and policy makers.

Few media coverages on the falling REC market:


Private Equity investment in cleantech reduces sharply

According to The Business Standard, private equity (PE) investments in clean technology projects have almost halved this year. This year the RE sector had 12 PE investments worth around $396 million whereas last year there were 36 PE deals worth $793 million. After removal of Accelerated depreciation the investment in wind sector has gone down. Investment has also been low in Solar, Biomass and Hydel energy as there is not a clear vision on its future power prices.The regulations and policies of different states is not very attractive enough to pull investors into their state.

With other benefits also being withdrawn, REC mechanism is only there to pull investors into RE sector. But REC market is also not in a good condition now because the enforcement of RPO is very weak and there is an oversupply of RECs in the market with very few buyers.

Abhay Anand, business director (infrastructure, energy) of Cipher Capital Advisors said,” More than the uncertainty over the Kyoto Protocol, it is the uncertainty over the renewal energy certificate (REC) programme that is denting the sentiments. The government had started the REC regime under which power distribution companies were mandated to buy the certificates. But there are no buyers for REC now. Lack of strict imposition of the regime is another reason for the lack of interest.”

The regulatory and policy makers have to come up with strong and attractive schemes to pull the PE investors in RE sector else they will slowly move out of the country.


REC Trading Report – October 2012

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.


Rajasthan High Court judgment will strengthen RPO enforcement

Rajasthan High Court Rules in Favour of RPO Regulations


Rajasthan High Court dismissed an appeal by Hindustan Zinc Ltd. , Ambuja Cements Ltd., Grasim Industries Ltd. and 14 other companies that challenged RPO regulations enacted by the state regulator (Rajasthan Electricity Regulatory Commission; RERC).

The key points contested by captive (CPP) and open access (OA) users in the petition were:

  • RERC did not have the authority to pass the order of RPO and impose surcharge (penalty) as CPP and OA were completely de-licensed activities under the Electricity Act 2003 (EA 2003)
  • EA 2003 only allows RPO on the ‘total consumption in the area of the distribution licensee’ and therefore intends to apply RPO on distribution licensees only

The petitioners supported their statement by stating that

“the National Electricity Policy as well as Tariff Policy was framed to promote production of energy and utilization. Under the Policy neither any license nor any approval from any authority is required to install a captive power plant thus, the Regulatory Commission had no jurisdiction to impose any obligation. Penalty in the form of surcharge cannot be imposed unless there is a direct provision enabling the Regulatory Commission to do so and since there is no such provision in the Act of 2003, penalty cannot be said to be within the authority of the Regulatory Commission and thus, imposition of surcharge is bad in law.”


The High Court rejected the petition stating:

  • The word ‘total consumption’ has been used in the EA 2003, and should be considered as total consumption in the area of distribution licensee in all modes. Total consumption has to be seen by consumers of distribution licensee, captive power plants and on supply through distribution licensee. It cannot be inferred by mention of area of distribution licensee that only consumers of the distribution licensee are included.
  • The objective behind imposition of RE obligation is in the greater public interest. The constitution casts duty on the Regulatory Commission to protect and improve the natural environment. This duty can be imposed on CPP and OA as well.

Impact of the order


This order will have far reaching implications for the RPO/ REC markets:

  • It will strengthen the hand of the regulator to enforce RPOs in Rajasthan and in other states
  • It will act as a precedent for similar court cases in other states – notably Gujarat and Tamil Nadu
  • It will result in demand from CPP and OA for RECs

RE obligation on CPP and OA in Rajasthan:

S.NO. Year RPO (%)
1 2011-12 6.00
2 2012-13 7.10
3 2013-14 8.20

Financial Year Total Consumption in Rajasthan* Captive and OA consumption* Obligation as per the regulation

49,491 (MU)

1530.65 (MU)

91.84 (MU)

2012-13 expected

50,659 (MU)

1566.77 (MU)

111.24 (MU)

*Assuming CEA data does not include captive and OA consumption

**Assumed to be 3% of total as per data provided in the High Court Order

Source: CEA data; REConnect Energy projections


Based on the above, the requirement of RE for meeting CPP and OA RPO is likely to be 200 MUs. A significant portion of this is likely to access the RECs market at least in the short to medium term. An important point to note is that the petitioners are likely to have options to pursue this case further in higher court.


Contributed by Rahul Tyagi

RECs markets face uncertaininty due to lack of enforcement: Businessworld

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.


Delhi announces its final RPO regulation

The most awaited RPO regulations was finally announced by Delhi Electricity Regulatory Commission (DERC) for the capital region.

Like RPO regulations of other states, DERC also came out with a similar one. The RPO regulation is applicable to:

  • Distribution Licensee(s) operating in the National Capital Territory of Delhi
  • Any Captive user, using other than renewable energy sources exceeding 1 MW
  • Any Open Access Consumer with a contract Demand exceeding 1 MW from sources other than renewable sources of energy.

The obligation till FY 2016-17 is shown in the table below:

Obligated entities have to submit necessary details regarding total consumption of electricity and purchase of energy from renewable sources before 30th April to the State Agency every year .

Open access consumer receiving electricity from renewable energy sources shall be exempted from the cross-subsidy surcharge determined by the Commission from time to time to the extent of RPO. However, no banking facility shall be provided for supply of electricity from renewable energy sources through open access.

The REC market will strengthen if the enforcement in Delhi has a good start as the consumption here is very high.

Contributed by Rahul Tyagi

REC Trading Report – June 2012

REC trading for June was conducted today (June 27, 2012). Compared to last month, there were a few surprises:

  • Supply exceeded demand for Non-Solar RECs for the first time since start of trading
  • Demand for Solar RECs grew significantly

Detailed analysis of Non-solar REC trading:

Price on IEX remained the same as in May (Rs 2,402), while on PXIL it increased from Rs 2,150 to Rs 2,460 (increase of 14%). Aggregate demand reduced to 349,000 RECs from 365,000 last month (-4%). At the same time, supply of RECs increased from 275,000 to 361,000 (increase of 31%). Of these, 236,000 RECs were sold.

As mentioned above, this was the very first time that supply of RECs exceeded demand. Given the mismatch, it was good to see prices hold/ increase slightly. However, if the situation persists, the peak pricing has probably been reached until stronger enforcement signals emerge from the regulators.

Detailed analysis of Solar REC trading:

June was the second month when solar RECs were traded. Demand has grown significantly since last month (from 1,642 to 9,619; approximately a 6X growth). Available RECs increased to 563 from 249 last month (2.2X). Pricing fell marginally from the high of Rs 13,000 last month to Rs 12,750 on IEX and Rs 12, 506 on PXIL. 342 Solar RECs were sold, up from 10 RECs last month.

Total market value exceeded Rs 57 crore, of which Rs 44 lakhs were from Solar RECs.

The Hindu quoted Vishal Pandya of REConnect which covered the June trading news:
“The overall market growth in both solar as well non-solar space seems good. However, with the first quarter of the financial year getting almost over, it would be highly desirable now to see state regulators and nodal agencies acting strictly on the RPO compliance,” says Mr Vishal Pandya, Director, REConnect.

Other links which covered the trading news :

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