REC Trading Results – April 2018

 

April saw trading resume for Solar RECs after a gap of one year, after the ApTel pronounced judgment in the case of REC pricing. Also, after record sale of Non-solar RECs in the last 5 months, there was almost no inventory left of Non-solar RECs. In both Solar and Non-solar RECs, demand was robust, considering that this is the first month of the new financial year.

 

Analysis of Trading:

 

Non Solar – Clearing ratio in exchange stood at 72.6% and 77.2% in IEX and PXIL respectively for Non Solar REC’s.  A total of 187,543 RECswere traded, despite demand being at 1,099,426 (as compared to 538,371 RECs traded April 2017; an increase of 104%). RECs traded at the floor price of Rs 1,000/ REC at PXIL, but increased by a minuscule fraction to Rs 1,001/ REC at IEX. However, this increase in the traded price above the floor price has come after a gap of almost 6 years (last trading above the floor price was in August 2012).
Solar – Demand was robust at 8.75 lakh RECs (3.2X demand of April 2017). Clearing ratio stood good at 23.8% and 10.4% in IEX and PXIL respectively.

ANALYSIS OF APTEL ORDER ON REC PRICING AND MULTIPLIER

Order in the case of REC pricing and vintage multiplier has now been uploaded on the ApTel’s website. Following is a quick summary of the same:
ApTel has rejected all prayers of the RE generators. Specifically, it has held:
–       Pricing: ApTel found no issues with the change in methodology by CERC when they used bid-discovered prices as against CERC determined generic tariffs.
The order states: “
“In view of the growing competition and induction of latest technologies, more and more generators are participating in the auctions/bids with considerable reduced cost of generation. Thus, the Central Commission in specifying REC prices, has shifted to bid discovered prices in place of earlier generic tariff fixed by it when the RE sector specially solar was in infancy stage.”
 
And
“We have carefully considered the contentions of all the parties and note that under the prevailing market scenario, the prices of RECs cannot be kept artificially high to burden the end consumers. Further, if the prices of RECs are kept high without aligning them with the market reality and current cost of electricity, the obligated entities may not purchase the RECs and try to fulfil their RPOs by other means.”
–       Vintage Multiplier – The ApTel has said that providing vintage multiplier is the “discretion” of CERC, and said that the CERC has provided “cogent reasoning” in its order, and further that the ApTel found “no unjustness in specifying the floor and forbearance prices of REC and discontinuation of the Vintage Multiplier”

–       In our opinion, the justification of price reduction is also to some extent based on factually incorrect premise. For example, the order says:
 
It is also noteworthy that sufficient time has been given to RE generators to sell their RECs at the power exchange but perhaps in anticipation of selling them at better prices has resulted into unsold REC inventory.”
 
            And further,
 
“Another important fact is that among the three routes available for RE generators, the REC capacity is dominated by RE generators operating under CGP and OA route rendering APPC route as the last choice”
 
We believe that this order will have a significant adverse impact on projects and investors that have invested in REC projects. An immediate impact will be that such project will have to bear heavy losses on the existing inventory of RECs – the losses will be particularly heavy for solar projects.
It also does not bode well for future investment in the REC mechanism, as falling RE prices are an irreversible trend. Does this mean that REC projects will have to bear losses of such reduction every year?

REC TRADE RESULTS MARCH 2018

For the first time after 2012, the total demand in REC (Non-Solar Segment) market exceeded the supply available. The trade session in March 2018 also ended the dry run that REC Market has been under since 2012 with 100% clearance on both the Power Exchanges!

Non-solar demand was significantly higher than in March 2017, and also last month. In total 27.69 lakh RECs were traded (211.63% higher than March 2017, and 17.43% higher than in February 2018), and clearing ratios on IEX and PXIL were 100% and 100% respectively. Total traded value was Rs 415 crores (This value is calculated considering the rate of Rs 1500 per REC out of which Rs 1000 go to the generator and Rs 500 goes to CERC).

Trading of solar RECs continues to be suspended due to the stay imposed by the Supreme Court.

 

This value is calculated considering the rate of Rs 1500 per REC out of which Rs 1000 go to the generator and Rs 500 goes to CERC

REC TRADE RESULTS JANUARY 2018

Non-solar demand was marginally lower than in January 2017, and also significantly than last month. However, it must be kept in mind that last month traded volumes were at a record high, and overall, this year has seen significantly higher demand.

In total 12.30 lakh RECs were traded (19.04% lower than January 2017, and 76.41% lower than in December 2017), and clearing ratios on IEX and PXIL were 7.83% and 30.55% respectively. Total traded value was Rs 184 crores*.
REConnect shifted its major volume on PXIL in a timely manner this trade session due to higher demand, resulting in higher clearing.
Trading of solar RECs continues to be suspended due to the stay imposed by the Supreme Court.
*This value is calculated considering the rate of Rs 1500 per REC out of which Rs 1000 go to the generator and Rs 500 is retained by CERC

REC TRADE RESULTS DECEMBER 2017

This month’s trading session saw highest ever trade in the REC markets – 2nd time in a row after the record trading session last month. Non-solar demand was significantly higher than in December 2016, and also last month. In total 52.17 lakh RECs were traded (1,136% higher than December 2016, and 136% higher than in November 2017), and clearing ratios on IEX and PXIL were 46.09% and 58.15% respectively.  Total traded value was Rs 782 crores.

The increase in traded volumes have been driven by demand from both Discom’s and captive generators. Several regulatory commissions have issued orders and notices in the recent past. This trend is expected to continue into the last quarter of the financial year.

Trading of solar RECs continues to be suspended due to the stay imposed by the Supreme Court.

REC TRADE RESULTS NOVEMBER 2017

Non-solar demand was significantly higher than inNovember 2016, and also higher than last month. In total 22.07 lakh RECs were traded (745% higher than November 2016, and 353% higher than in October 2017), and clearing ratios on IEX and PXIL were 19.39% and 13.33% respectively. The increase in the number of RECs traded was partly because of the push by DISCOMs towards RPO compliance.

Trading of solar RECs  has been suspended due to the stay imposed by the Supreme Court.

 

REC TRADE RESULTS OCTOBER 2017

Non-solar demand was significantly higher than in October 2016, and also higher than last month. In total 4.87 lakh RECs were traded (90.78% higher than October 2016, and 27.51% higher than in September 2017), and clearing ratios on IEX and PXIL were 4.5% and 3.3% respectively. Solar RECs did not trade due to a stay imposed by the Supreme Court.

 

REC TRADE RESULTS SEPTEMBER 2017

Non-solar demand was significantly higher than in September 2016, and also higher than last month. In total 3.82 lakh RECs were traded (47.56% higher than September 2016, and 32% higher than in August 2017), and clearing ratios on IEX and PXIL were 3.56% and 2.36% respectively.

Overall, for the six months ended September, Non-solar demand is up by 11% compared to the same period last year. Solar demand is up by 27% despite reading only in April this year. Since then, trading has been suspended due to the stay imposed by the Supreme Court.

 

REC TRADE RESULT AUGUST 2017

Supreme Court allowed conditional trading of Non-solar RECs in an order dated July 14, 2017 . Demand was expected to be low for two reasons – 1) obligated entities are required to pay at old RECs rate (Rs 1500/ REC); and 2) compliance is required to be done by March to obligated entities have enough time to comply even after the final order of Aptel is received.

This is the second month when trading has taken place after CERC allowed conditional trading of Non-Solar RECs but the demand was not as robust as last time .

Non-solar demand was marginally higher than in August 2016 , and significantly lower than last month. In total 2.89 lakh RECs were traded (11.83 % higher than August 2016), and clearing ratios on IEX and PXIL were 1.05% and 4.96% respectively.


Solar RECs were not traded as the stay imposed by the Supreme Court remains in force in the case of Solar RECs.

REC TRADE RESULT JULY 2017

Supreme Court allowed conditional trading of Non-solar RECs on July 14, 2017 (our blog on the same can be accessed here). Demand was expected to be low for two reasons – 1) obligated entities are required to pay at old RECs rate (Rs 1500/ REC); and 2) compliance is required to be done by March to obligated entities have enough time to comply even after the final order of Aptel is received.

However, demand for Non-solar RECs was robust. In total 4.95 lakh RECs were bought (110.76 % higher than July 2016), and clearing ratios on IEX and PXIL were 4.31% and 3.52% respectively. Higher demand was primarily driven by demand for some utilities where state regulators had given RPO enforcement orders in recent months.

Solar RECs were not traded as the stay imposed by the Supreme Court remains in force in the case of Solar RECs.
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