REC Trade result December 2016

This month trading saw good results with respect to the Non solar REC clearance overall. The demand for solar REC saw marginal improvement in respect to the last month. The total transaction value stood at 74.4 Crores in comparison to 53.6 Crores last month.

This month saw fall in the total issuance where the demand decreased by 4.60Lakhs in comparison to November. Though there had been significant increase in the total REC issuance due to the impact of CERC’s 4th amendment to RECs regulations.

Analysis of Trading:

Non Solar – The clearing ratio stood at 3.19% and 2.81% in both IEX and PXIL, with a significant increase of 61% in the no. of REC’s traded as compared to last month

Solar – Clearing ratio stood at 0.85% and 0.53% in IEX and PXIL respectively, with a dip of 23% in total demand of Solar RECs as compared to November.




REC Trade Result November 2016

This month trading saw stagnant results in respect to the demand for Non-Solar REC’s. The demand for solar REC saw marginal improvement in respect to the last month. The total transaction value stood at 53.6 Crores in comparison to 50.6 Crores last month.


Analysis of Trading:


Non Solar – The clearing ratio stood at 1.85% and 2% in both IEX and PXIL, with a significant increase of 2.25% in the no. of REC’s traded as compared to last month

Solar – Clearing ratio stood at 1.13 % and 0.96% in IEX and PXIL respectively, with an increase of 17.5% in total demand of Solar RECs as compared to last month.


This month also saw significant increase in total REC issuance, where the demand increased by 9 lakh in comparison to October. This could be attributed due to the impact of CERC’s 4th amendment to RECs regulations.

REC Trade Result March 2016

March, being the last month of the Financial Year to fulfil the yearly RPO obligations, saw significant rise in demand in both the Solar and Non-Solar segments, as compared to the last three months. Non-Solar RECs demand almost doubled and Solar RECs demand rose by 68.45%, as compared to February. This was the result of stricter compliance and can also be attributed to the recent Ad by MNRE asking all entities to fulfil their obligation. The total transaction value stood at 213.3 Crores as compared to 119.5 Crores last month.

Analysis of Trading:

Non Solar – Clearing ratio in exchange stood at 7.65% and 8.93% in IEX and PXIL respectively for Non Solar REC’s. A total of 11, 14,319 RECs were traded as compared to 586,501 RECs traded in February. Overall, it was a good recovery in this segment, which also saw the closing Inventory come down marginally.

Solar – Clearing ratio stood good at 5.07% and 3.35% in IEX and PXIL respectively, with total clearing volume of 152,006, as compared to 90,236 last month. The recovery was good, but contrary to the Non-Solar inventory, the solar inventory showed no reduction.


As compared to March-2015, where the Non-Solar and Solar demand stood at 654985 and 68982 respectively, it was 70% and 120% higher for Non-Solar and solar respectively, in March-2016. However, the closing inventory for the FY stands at 13.28 million and 3.31 million for Non-Solar and Solar respectively, worth close to Rs. 3151 Crores. April-2015 trading saw huge clearance due to late fulfillment of obligations, and the same can be expected next month as well.

We are hopeful that the FY 2016-17 will bring good fortune to the REC market, considering the proposed regulatory changes and more stricter enforcement by states, which will bring back stakeholders confidence.

Analysis of the 5th Amendment to REC Regulations


Recently, CERC proposed the 5th amendment to REC regulations. The gist of proposed changes is:

  • Captive generators and portion of power for self-consumption will no longer be eligible for RECs
  • If an open access (OA) project avails concessional wheeling, banking or cross-subsidy benefits, it will not be eligible for RECs

These changes have been proposed in the context of an REC market that faces significant oversupply. As on June 30 2015, RECs worth 2,650 crore remain unsold, and clearing percentages in many months are well below 5%. In most months, more RECs have been issued than redeemed, further aggravating the problem of over-supply.

In the explanatory memorandum, CERC has elaborated on the thinking behind the proposed amendment. The memo states:

Lack of RPO enforcement has been one of the major reasons for the high level of unsold REC inventory. However, it is also important to analyze the supply side aspects and understand whether the right beneficiaries (as was envisaged while introducing REC framework) are participating and able to compete in the REC market. It remains a fact that a major portion of the REC inventory is contributed by the CGPs. Also, developers under third party model are able to leverage the concessional benefits while participating under 
REC framework.” (Emphasis added)


“Around 51% of the projects under the CGP route were commissioned before the first notification (14 January 2010) of the REC Regulation. These projects must have computed their financial viability without the REC benefit.” 

The proposed changes will have far-reaching implications on the REC market structure. As per data provided in the Explanatory Memo approximately 41% of the capacity (under captive generation) will be completely excluded from RECs markets, and a significant portion of OA capacity (19% of total) will be impacted.

Analysis by REConnect Energy suggests that annual RECs generation may fall from 96.25 lakhs in FY 14-15 to 54.30 lakhs per year after the amendment.

Table: Annual RECs Issuance

 Sources: REC registry website; REConnect analysis

Note: Annualized redemption is assumed to be 2X times redemption is FY 14-15. Increase is expected due to SC order and Electricity Act amendment.

Impact on Open Access (OA) projects:

The proposed amendment is contrary to the provision in the draft Electricity Amendment bill (EA Bill) in the Parliament, and of many state policies.

The EA Bill says:

Sec 42(4):

“The open access consumers procuring electricity from renewable energy sources shall not be required to pay the surcharge for open access for such period as may be prescribed by the Central Government”

 Surcharge in the above context means cross-subsidy surcharge (CSS).

 If the EA Bill is to be passed by the Parliament, the impact of the 5th Amendment will be to make all RE projects in OA ineligible for RECs. This will discourage OA in renewable energy – something that goes against one of the principle objectives of the EA and of CERC (to encourage market development in the electricity sector).

Further, many states allow concessional cross-subsidy or exemption from cross-subsidy as a way to promote open access in RE projects. For example, Rajasthan’s solar policy exempts solar projects under open access from CSS. Similar provisions exist in many state policies.

Renewable Energy projects will not be viable under open access without concessional CSS provided by the states. States realize this – and therefore the concession exists in the first place. If RECs benefits were to be denied to such projects, it’s the equivalent of giving from one hand and taking from another. The net result of the amendment will be to completely finish-off the OA market for RE power – this is something that will be contrary to one of the fundamental pillars of the Electricity Act.

Further, in many existing OA transactions, prices are likely to have been negotiated knowing the fact that the RE project will get revenue from RECs. Such projects may suddenly become unviable. In many states with low tariffs, such projects will not remain competitive without RECs and therefore risk becoming NPAs.

Impact on Captive Generating (CGP) projects:

As mentioned above, the impact on CGPs of the amendment will be drastic. All CGP’s will be considered ineligible for RECs benefits. However, in proposing the amendment, CERC has failed to consider the case of two categories of projects–

(1)   CGPs set up specifically to meet RPO requirements, and

(2)   CGPs under the group captive mechanism

Since CERC amended the RECs regulation to allow self-retention of RECs by obligated entities, many companies have set up CGPs in one state and meet their obligation in other states through retention of RECs. This approach has multiple benefits – it has encouraged setting up of new RE capacity, and also helps the obligated entity manage its compliance costs.

The proposed amendment will take away this benefit to obligated entities. This is erroneous on three counts – (a) the CGP is likely to have been setup by the obligated entity to meet RPO across units. Such an investment, made in good faith keeping in mind existing regulations, may become redundant after the regulation, (b) it will discourage setting up of large new RE capacities as obligated entities will not be able to meet RPO in states that have low RE resources, and (c) it will take away a valid means for obligated entities to comply with RPO, leaving them with very limited options – buying of RECs.

Group captive projects, on the other hand, also face difficulties due to the amendment. In many group captive projects, the primary investment is made by an investor, and power prices are determined through negotiations. Further, such projects tend to be long term in nature as they involve an element of equity investment by the consumer. A sudden change in RECs eligibility is likely to make such projects unviable, and result in severe losses to investors who set up projects assuming a stable RECs regime.

Overall, we believe that while CERC’s intent to correct the supply imbalance in the RECs market is needed, the unintended consequence of the 5th amendment on open access and captive projects will be harmful to the growth of the renewable energy industry.

REConnect Newsletter Volume 52 (June 2015) – OPEN ACCESS

Dear Reader,

 We are please to present OPEN ACCESS – our monthly newsletter that covers important developments in the renewable energy markets. This month’s newsletter covers:

  • Detailed analysis of the 5th Amendment to REC regulations proposed by CERC. This amendment will have significant impact on renewable energy based CPPs and OA projects, and also on the market demand-supply situation down the road
  • Updates on regulatory changes from Gujarat, Telangana, MP, Mahasrashtra, JERC and Rajasthan
  • Analysis of the REC trading sessions in June. Demand was well below May trading volumes. However, the broad trend remains positive due to the SC order on RPO.

 The newsletter can also be downloaded by clicking here – or past newsletters from here.

We hope you enjoy reading the newsletter. Please send us comments and feedback.


 Team REConnect

Andhra Pradesh declares APPC for FY15

Hon’ble Andhra Pradesh Electricity Regulatory Commission (APERC) in an order (DATED – 31 MAY 2014) has determined the APPC for FY 14-15.

The definition of the APPC being followed by APERC can be read as –

‘Pooled Cost of Power Purchase (PCPP)’ means the weighted average pooled price at which the distribution licensee has purchased electricity in the previous year from all the long-term energy suppliers excluding the purchases based on liquid fuel. Provided that the purchases from traders, short-term purchases and purchases from renewable sources shall not be taken into account while determining Pooled Cost of Power Purchase.

AP’s APPC definition is not in sync with that of CERC as it excludes power purchases from suppliers based on liquid fuel, Purchases from Traders, short term purchases and purchases from Renewable sources.

The APPC for FY 14-15 has been calculated as Rs. 3.38 per unit.

The APPC is AP has been growing steadily with a CAGR of 7.91%.

The order by APERC can be found here.

Our previous Blog posts on APPC of other states can be Read here.

Contributed by – Dheeraj Babariya

Madhya Pradesh determines APPC for FY15

Madhya Pradesh Electricity Regulatory Commission (MPERC) has finally unveiled its APPC rate for financial year 2014-15. MPERC follows this definition of APPC  (which is in line with that of CERC) –

for the purpose of these regulations ‘Pooled Cost of Purchase’ means the  weighted average pooled price at which the distribution licensee has purchased the  electricity including cost of self generation, if any, in the previous year from all the energy  suppliers long-term and short-term, but excluding those based on renewable energy  sources, as the case may be.”

i.e. it excludes only renewable energy for APPC rate calculation.

Accordingly the APPC for FY15 has been determined as Rs. 2.66 per unit (up by 5.13% as compared to APPC FY14).

APPC for FY14 was Rs. 2.53 per unit.

More details can be had on Page no. 63 of this Retail Tariff Order.

REConnect Newsletter Volume 41 – OPEN ACCESS

Dear Reader,

We are pleased to present Open Access Vol. 41 – our monthly newsletter covering RECs and regulatory – market developments in the renewable energy space.

Key points covered in this newsletter are:

1) Our analysis on the likelihood of RPO enforcement in FY 2014-15.

2) Regulatory updates including KERC’s final APPC for FY14 & FY15 (interim) & JSERC order on declaration of Bokaro Steel Plant’s CPP as Cogeneration unit.

3) Analysis of the most recent trading session of RECs and capacities in the REC mechanism.

The newsletter is attached with this email and also can be found on our webpage –

We hope that you find the newsletter a useful read. Do provide us feedback.


– Team REConnect

REConnect Newsletter Volume 40 – OPEN ACCESS

Dear Reader,

We are pleased to present Open Access Vol 40 – our monthly newsletter covering RECs and regulatory and market developments in the renewable energy space.

Key points covered in this newsletter are:

 1) Two important announcements – Infuse Ventures – a clean tech focused venture capital fund invested in REConnect Energy, and 2) The scheduling and forecasting team reached an important milestone of sending over 15,000 schedules till date. This milestone was achieved in a short span of 8 months.

 2) A detailed analysis of the REC markets in FY 2013-14

 3) Regulatory updates including important changes in RPO regualtions in Gujarat and Rajasthan

 4) Analysis of the most recent trading session of RECs and capacities in the REC mechanism

 The newsletter can also be downloaded by clicking here – or past newsletters from here.

 We hope you find the newsletter a useful read. Do provide us feedback.


– Team REConnect

Rajasthan proposes amendment to RPO regulations

Hon’ble Rajasthan Electricity Regulatory Commission (RERC) has recently proposed an amendment to its principal RPO regulations. Comments have been invited by all stakeholders no later than 18th March 2014. Link to the proposal –

These changes, if incorporated into the RPO regulations will have significant impact on CPPs and OA in Rajasthan.

Following are the highlights of such changes –

1)      Solar RPO will have to be fulfilled separately,

2)      Co-gen and WHR power will no longer be allowed to offset RPO, and

3)      The RPO percentages will increase.

4)      Stricter enforcement of RPO likely.

The proposed changes are discussed in detail below:

Inclusion of Solar RPO for captive power plants (CPP) and open access consumers (OA):

In the present regulation there is no separate solar RPO. As a result in most cases CPPs and OA consumers would meet their obligations through non-solar sources. The proposed amendment introduces a separate carve-out for solar RPO that can be met through solar power/ solar REC alone.

However, the requirement of meeting solar RPO separately will only apply to CPPs and OA of 10MW or more installed capacity. CPPs and OA below 10 MW will be required to meet RPO in total only, as is the present case.

This change will bring Rajasthan RPO in line with most other state RPO regulations, and also in line with the National Tariff Policy. After this change, Karnataka will remain the only exception where CPP and OA do not have a separate Solar RPO.

Removal of Co-generation as RE power:

The present regulation considered co-generation as equivalent to RE power. As a result several CPPs and OA could fulfill their RPO obligations by consumption of co-gen power. In a separate pronouncement, the Rajasthan Electricity Regulatory Commission (RERC) has considered Waste Heat Recovery (WHR) as co-generation.

The proposed amendment will not allow offsetting of RPO from conventional power generation or OA from co-gen power. This change follows the recent order of ApTel in the case of Lloyds Metal & Energy. The order can be accessed here. Our blog-post covering the issue can be read – here.

In the above order, ApTel has stated the following:

Upon conjoint reading of the provisions of the Electricity Act, the National Electricity Policy, Tariff Policy and the intent of the legislature while passing the Electricity Act as reflected in the Report of the Standing Committee on Energy presented to LokSabha on 19.12.2002, we have come to the conclusion that a distribution company cannot be fastened with the obligation to purchase a percentage of its consumption from fossil fuel based co-generation under Section 86(1)(e) of the Electricity Act, 2003. Such purchase obligation 86(1)(e) can be fastened only from electricity generated from renewable sources of energy.

It is important to note that co-gen power will continue to be exempted from RPO (as per several orders from ApTel earlier). However, such power will no longer be allowed to offset RPO emanating from other sources like conventional generation or OA. This change will bring Rajasthan RPO regulations in line with the regulations of most states, and with the interpretations of Aptel.

Increase in RPO percentages:

The proposed RPO percentages are:

CPP & OA Consumer with total capacity of 10 MW and above:

Year Non-solar RPO Solar RPO Total RPO
2014-15 7.50 1.50 9.00
2015-16 8.20 2.00 10.20
2016-17 8.90 2.50 11.40

CPP & OA Consumer with total capacity of more than 1 MW bet less than 10 MW:


Total RPO %







Stricter enforcement of RPO likely

RERC notes the following in the proposed amendment: certain CPP & Open Access Consumer have made an appeal in Hon’ble Supreme Court against this order of Hon’ble[Rajasthan] High Court. As there is no stay in the matter, the obligated entities are bound to comply with RPO mandate. Further, RERC has also mentioned that the state agency is in the process of identifying compliance levels by CPPs and OA in the state. These comments point to a stricter enforcement of RPO in the near future.

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