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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

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

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”

Demand fell off the cliff this month, mainly driven by enforcement concerns and expectations of price fall in the future (due to increasing supply). Aggregate demand reduced to 161,000 RECs from 350,000 last month (-54%). On the other hand, supply of RECs increased from 360,000 to 467,000 (increase of 30%). Of these, 158,000 RECs were sold (last month – 236,000; down by 33%).

Detailed analysis of Non-solar REC trading:

The market clearing price on IEX and PXIL was Rs. 2,000 and Rs.2,202 respectively. (Last month it was Rs. 2,402 at IEX and Rs. 2,460 at PXIL; down 17% and 10% respectively).

The price fall is not surprising, given the steep fall in demand. The low demand and cleared volume leaves an overhang of close to 350,000 RECs this month. Next month this is likely to result in significant oversupply, putting further pressure on prices.

Detailed analysis of Solar REC trading:

In the third session of Solar REC trading demand fell marginally from last month (from 9,619 to 8,754; down 9%). RECs bid for sale also reduced marginally to 549 from 563 last month (-2%). The market clearing price on both power exchanges was Rs. 12,800 (Its rose from Rs.12750 on IEX and Rs.12506 on PXIL). Only 179 Solar RECs were sold (last month it was 342).

Total market value exceeded Rs 32 crore, of which Rs 22 lakhs were from Solar RECs. This is down 44% in aggregate.

The Hindu quoted Vishal Pandya of REConnect which covered the July trading news:

“With the market starting high during initial months of the financial year itself, we were actually expecting this. However, with prices declining in REC, we can expect new buyers emerging and, hence, prices getting stabilised after few months,” Mr Vishal Pandya, Director, REConnect

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 :

• Economic Times
• Panchabuta

Solar RECs were traded for the very first time in India in the May trading session. REConnect sold Solar RECs issued to M&B Switchgear Ltd (a company that operates a 2MW solar plant in MP). The market clearing prices on both exchanges was Rs.13,000. The total demand of Solar RECs was 1642, whereas the supply was only 249. With 17.16 MW capacity already accredited under the REC mechanism, and more in the pipeline, we expect Solar REC trading to be a regular feature going forward.

Non-solar RECs

Aggregate prices and volume increased from previous month, despite significantly higher participation by sellers (275000 RECs were bid for sale in May 2012, 107% over April 2012). This may have been a function of higher than expected prices in April.

Demand jumped significantly too – total demand was for over 365,000 RECs, up 38% from last month. The more important point here is that demand this month was higher than in March 2012, which was the end of the compliance period. For demand to be this high in the second month of the new compliance period is an important sign for the market.

Prices rose at IEX – the market clearing price was Rs. 2,402/REC (increase of 9% over April 2012) ,whereas at PXIL prices declined marginally to Rs. 2,150 /REC (reduction of 2%). Last month, prices were Rs. 2201/REC at both the exchanges.

Overall, robust demand and high prices are a good sign for renewable generators.

Trading Data:

The Hindu quoted Vishal Pandya of REConnect in an article that covered May REC trading:

“This particular session was of significant importance since we were expecting to trade the first ever Solar REC in India. It was also heartening to see the rise of Solar REC market in India as well robust demand in non-solar space. This should boost confidence level of investors for REC mechanism in both solar as well as non-solar space,” says Mr Vishal Pandya, Director, REConnect

Other press coverage for the first Solar RECs trading:

• Economic times
• Indiainfoline
• IBN

Contributed by Anuj Xess