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REC Trade Report – March 2014

We are pleased to bring the REC trade results and our analysis on REC trade session conducted on 26th March 2014. Following is a brief of the analysis:

With this trade session, a 12-month long financial year FY 2013-14 comes to an end. The prices for both credits (solar as well as non-solar) remained at floor for most part of the year.  Poor enforcement measures of RPO across states saw a continuous lack of demand in the market.

Close to 17.5 lac RECs were issued in March’14 itself, which is a huge 15 % (approx.) of the total RECs issued till date in India (since March 2011) . This can be attributed to issuances of RECs w.r.t sugar co-gen units in Uttar Pradesh.

A strong policy review is the need of the hour. It is likely and should be expected, that the forum of regulators (FOR) takes up this issue for discussions during the forthcoming 40th meeting scheduled on 2nd April 2014.

Non Solar RECs -

Non Solar REC Supply grew by around 22%. Demand also went up by a massive 74%, owing to March being last month of FY14 (and not due to strong RPO enforcement). Evidently, clearing volume also touched a new high of around 6.5 lac RECs.

Non-Solar REC Price continued to trade at floor price of Rs. 1500 per REC.

Solar RECs -

In case of solar RECs also all volumes had an uptick. Supply was up by 13.22.6 % and demand by 32.63 %. The total clearing volume of solar RECs at both exchanges was 11,019 RECs.

As per REC registry, 24370 solar RECs were issued in March 2014.

Unlike in non-solar REC markets, the solar RECs started trading at floor, only from June 2013. The discovered price of solar RECs remained at floor – Rs. 9300 per REC.

Keeping in view the overall market performance, it can be said that the time ahead for investors in solar REC markets remains grim.

For a similar blog-post covering analysis on previous months trade session – click here.

A quick glimpse of trade stats can be had on our Market Tracker.

Joint ERC proposes amendment to RPO regulations

JERC; the joint electricity regulatory commission for the state of Goa and UTs has recently proposed a draft to its principal RPO regulations of 2010. The main highlight of the amendment is the declaration of RPO targets from FY14-FY22. The targets set for the years till FY22 are as in the table below:

There were few other changes in definitions as:

1. Renewable Energy Sources – Electricity generating sources recognised or approved by the Ministry of New & Renewable Energy and includes bundled power purchase (to the extent of renewable energy content in the bundled power), power generated  from cogeneration based power plants and certified by the state accredited agency. 

2. Obligated Entity – the entity mandated under clause (e) of sub-section (1) section 86 of the Act to fulfill the renewable purchase obligation under these regulations and includes distribution licensee, captive user for 1 MW and above with fossil fuel (excluding co-generation based captive power plants) and open access consumer.

3. Renewable Purchase Obligation - quantum as mandated under clause (e) of sub-section (1) of section 86 of the Act and specified under these regulations for the obligated entity to purchase electricity generated from renewable energy sources. 

 

Comments on this were invited by 23.01.2014.

The draft order on amendment can be accessed here.

Principal RPO regulations 2010 of JERC are available here.

Gujarat’s first amendment to RPO regulations

Gujarat Electricity Regulatory Commission (GERC) on 4th March 2014 amended its principal RPO regulations of 2010. In these regulations, Gujarat set its RPO targets post FY13. The RPO set are from FY14 to FY17.

Gujarat announced 10% of energy procurement to come from renewable sources, for its obligated entities for FY17.

The year-wise RPO targets effective April 2014 are tabulated below:

GERC also introduced the definition of APPC which was hitherto missing. Average Power Purchase Cost (APPC) for the purpose of REC Mechanism is in line with that of CERC and is defined as -

‘Average Power Purchase Cost’ 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.’

In addition, GERC also clarified that a RE project registered under REC mechanism selling power under captive or third party mode will receive payment equal to APPC for excess injection after off-setting its own consumption, from the discom.

The present order on amendment can be accessed here

The principal RPO regulations of 2010 can be read here

CERC notifies changes to REC procedures

CERC recently notified revised procedures for REC mechanism through an order dated 17th Feb 2014. Following are the changes:

1. REC registration applications

a. Recommendation by SA for Registration of Project under REC Mechanism in the format prescribed to be furnished along with the application.

b.Claim for refund to be made within 15 days from the day of payment. Claim made later will not be entertained.

c. Format of the declaration has been modified (Refer to the Order).

2. REC Issuance applications :

This procedure shall be applicable to all Eligible Entities, who have received Certificate of Registration‟ from the Central Agency, and shall be eligible to avail Renewable Energy Certificates from the date of commercial operation or from the 00:00 hrs of next day of Registration date of such plant by the Central Agency whichever is later.

This deviates with the 2nd amendment of the REC regulations which says

“After registration, the renewable energy generation plant shall be eligible for issuance of Certificates under these Regulations from the date of commercial operation or from the date of registration of such plant by the Central Agency whichever is later”

a. Central Agency shall not issue RECs during the trading session at the Power Exchange.

b. The Eligible Entity shall apply for issuance of RECs within six (6) months from the month in which RE was generated and injected into the electricity grid. At least 6 clear working days are available to Central Agency for considering the application.

c.  The application for issuance of Renewable Energy Certificates may be made on 10th, 20th and last day of the month.

3. Retention of RECs:

a. SA to accept application for retention of RECs and shall issue ‘certificate of purchase’ of RECs to the buyer.

b. Eligible entity to apply it online from 1st to 5th of every month.

c. Hard copy of the application has to be submitted by 9th of every month to SA.

d. SA to check the proposed volume and application by 15th of every month.

e. SA to inform CA of list of RECs which will be by 22nd of every month.

4. REC Accreditation application:

The RE generator shall obtain a certificate from the concerned distribution Licensee for the connected load in case of co-generation plants. The Distribution Licensee shall issue such certificate within 15 days from the date of application by the RE Generator and the RE Generator shall submit it to State Agency along with application for accreditation.

 

REC Trade Report – February 2014

We are pleased to bring the REC trade results and our analysis on REC trade session conducted on 26th February 2014. Following is a brief of the analysis:

February 2014 was the second last trade session of Q4 for FY14. Clearing Ratios improved for both exchanges  (IEX and PXIL) and was recorded just over 8% in terms of non-solar RECs.. As per REC Registry, the market redeemed a total of 3.87 lakh RECs (up by 6 % as compared to last month).

Non-Solar RECs:

Buy bids for non-solar credits rose by 5.5 percent in comparison to last month’s stats. Clearing percentages at both exchanges were at parity. The total transactional value of non-solar RECs was 568 million INR, with price of each non-solar REC remaining at floor (Rs. 1500 per Non Solar REC). REC registry noted a total non-solar RECs redeemed to be around 3.78 lac.

Solar RECs:

Demand of solar RECs jumped by an encouraging 30.58 percent compared to January 2014 trade session. Solar RECs continued to trade at floor price (Rs. 9300 per solar REC). Evidently total solar REC transactional value was also recorded low at about 77.2 million INR. As per REC registry,  8308 solar RECs were redeemed.

For a similar blogpost covering analysis on previous months trade session – click here.

Govt. pushes for stronger RPO enforcements

The Ministry of New & Renewable Energy (MNRE) has written to Ministry of Power (MoP) to include stronger enforcement provisions in the Electricity Act itself, which at present is absent.

An article in Business Standard, quoted Joint Secretary of MNRE saying the following, at an event:

“What we have requested is that the Electricity Act itself should mention about RPO… Or there (should) be some other alternative, so that it becomes binding. Also the enforcement provision should be more stronger,”.

He also called for greater investments in renewable energy sector of India.

REC markets have been performing poorly. In January 2014 also, which was 1st month of last quarter of FY14, the volumes remained far from encouraging and resulted in continued clearing of RECs at floor price. More insights can be learnt by clicking here – REC Trade Report – January 2014.

According to recent details made public by Hon’ble MNRE, as on 31st January 2014, the total grid connected renewable capacity of the country has touched 30 GW. However, the achievements highlighted are only around 50 % of the target for the year. The details can be accessed here – MNRE – Physical Progress (Achievements).

Gujarat DISCOMs approach CERC to seek REC benefits

Gujarat Urja Vikas Nigam Limited (GUVNL) on behalf of DISCOMs , had approached Hon’ble CERC for certain amendments to REC regulations, enabling the former to claim solar RECs as “Eligible Entity” for excess procurement over & above the stipulated RPO targets. GUVNL had submitted (in Petition no. 128/MP/2013) that dis-allowance of RECs for excess solar power procurement after meeting RPO targets, is a disincentive  for DISCOMs who have been buying solar power at promotional tariffs with an aim to promote solar power generation in the state.

The matter is unprecedented because an obligated entity (usually a buyer of RECs) wants to claim RECs for excess power procurement and not excess power generation.

In the order dated 2nd Dec 2013 (refer), GUVNL brought forward that DISCOMs had to tie up solar capacity of 380 MW to comply with RPO targets (of 1% in FY13). DISCOMs in-fact have signed PPAs of 971.5 MW solar capacity, that too at promotional tariffs.

GUVNL has also argued that buying costly solar power from developers is going to financially impact the consumers in the state as the higher cost of power procurement is passed on to them. To abrogate such a case, it proposes to claim RECs which will reward DISCOMs as well as take care of consumer interests.  GUVNL also requested for a provision where RPO surplus DISCOMs are allowed to exchange RECs with RPO deficit ones by bypassing prevailing exchange based transactions. In our view, this particular demand questions the very purpose of having a double side closed fair market-based mechanism for RECs.

GUVNL had also prayed the apex commission puts in place a uniform solar RPO target for all states in India.

CERC, in the order, is of the view that current regulations stipulating generators only for claiming RECs is adequate for a healthy REC market. Hon’ble commissions decision can be read as -

“The Commission is of the view that the existing provisions of eligibility in the  REC Regulations which is limited to generating companies is adequate at this stage of development of REC market. Without going into the merit of the issues raised, we intend to clarify that filing of the petition is not the proper process for initiating the amendment to the existing regulations. The Commission under Section 178 of the Act has been vested with the power to make, amend and repeal the regulations on the subjects which have been authorized under various provisions of the Act. Action to make or amend the regulations is initiated when the Commission is satisfied that there is need for such regulations or amendment to the existing regulations.”

However, the commission directed its staff to analyse the issue and come up with an appropriate proposal for consideration.

According to Press Information Bureau (Release ID :103402) the matter was brought to light by Hon’ble Minister of New & Renewable Energy in the Lok Sabha (on 7th Feb 2014). In a written reply Hon’ble Minister quoted that obligated entities were free to procure power over and above RPO targets and that any changes to existing regulations is a quasi-judicial process and the CERC takes a view after following due process of law including public hearing. 

REC Trade Report – January 2014

January 2014 marks first month of Q4 for FY14. Overall the clearing volumes for both type of RECs were marginally less than previous month. As per REC Registry, the market redeemed a total of 3.65 lakh RECs.

Non-Solar RECs :

Buy bids for non-solar credits went down by 11 percent in comparison to last month’s stats.. Clearing percentages at both exchanges largely varied. The total transactional value of non-solar RECs was 538 million INR, with price of each non-solar REC remaining at floor (Rs. 1500 per Non Solar REC).

Solar RECs:

Demand of solar RECs tumbled by 19 percent compared to December 2013 trade session. Solar RECs continued to trade at floor price (Rs. 9300 per solar REC). Evidently total solar REC transactional value was also recorded low at about 59.2 million INR. As per REC registry, only 6361 solar RECs were redeemed. With only two months remaining in current financial year, market rebounding to encouraging figures seems far from reality.

For a similar blogpost covering analysis on previous months trade session – click here

 

REC Trade Report – December 2013

December 2013 marks the end of Q3 for FY14. Overall the results have sustained optimism as compared to the preceding trading month. With last three months still remaining in this year and chances of higher buyer-side participation in the subsequent sessions, we expect REC markets to reverse its fading lustre considerably. As per REC Registry, the market crossed 0.4 million mark in terms of REC redeemed. This volume (4,11,744 RECs) traded in a single session is the highest redeemed volume of this fiscal and more importantly marginally matches the volume of March 2013 (last month of FY13). A more detailed analysis for each kind of RECs can be read as under:

Non-Solar RECs :

Buy bids for non-solar credits increased by 30.73 percent in comparison to last month’s stats. The most encouraging fact, considering a holistic view of FY14, was the cleared volume crossing the 0.4 million mark. Clearing percentages at both exchanges (IEX and PXIL) were recorded at parity (over 9%). With a total transactional value of non-solar RECs of 605.8 million INR, price of each non-solar REC remained at floor price of Rs. 1500 per REC.

Solar RECs:

The change in demand and supply as compared to previous month was up this month by 7.18 percent and 47.37 percent respectively. Although, the prices here also remained at floor we can still expect a jump in demand as we slip in the last quarter.

For previous months trade results – Click Here.

REC Trade Report – November 2013

Non-solar RECs:
November 2013 REC trading witnessed an increase in volumes. The spike in demand is a sign that RPO enforcement is taking its gradual effect and some states are ensuring buyers participation, thereby keeping the market upbeat. For non-solar RECs, the demand increased by 105% w.r.t last month. This indicates, there is increased momentum towards complying with RPO by end of FY 2013-14. With stricter RPO compliance regimes mandated in states like Punjab, Uttarakhand, Maharashtra and Union Territories (recently), clearing ratios can be expected to go up in forthcoming trading session. More insights can be drawn from fig.1.
Fig1: Non-Solar trade stats – November 2013 
Non-solar RECs – The supply this month had a flip side. It was reduced to 6.5 % (almost half) as compared last trading session. The inventory at the registry was at 45 Lac RECs owing to reduced issuance (less by 1 lac RECs as compared to last month).
Fig 2: Non-Solar Market Clearing Price – November 2013
Solar RECs:
33rd trading session offered an alarming signal to the solar REC market space. As compared to previous trading sessions, all the parameters namely demand, supply and cleared volumes plummeted. Demand for solar RECs fell by 20.56 % and at the same time, supply was down by 9.71 %. As per a recent report by CEA, as on 31.07.2013, solar generation capacity (above 1 MW) was only 6.79%  (1650 MW) in RE rich states of Rajasthan, Gujarat, Maharashtra, Karnataka, and Tamil Nadu out of total RE capacity of 24265 MW in these states. This shows the lacklustre performance of solar industry in the country which in-turn has resulted into poor supply REC market. Only 2936 solar RECs were issued between 31.10.2013 and 28.11.2013 (Source: REC Registry).
Fig 3: Solar market trade stats – November 2013
Needless to say, the price remained at floor yet again with meagre expectations of an upside.
Fig 4: Solar Market clearing price  - November 2013
More data can be found in the table below:
 Link to October 2013 trade report – Click Here.