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May 2011

Karnataka has notified draft policy on Solar Power development for the state of Karnataka. According to the drat policy, Karnataka is gearing up to install total 300 MW of additional capacity from Solar power plants (PV & Thermal collectively) in a phased manner by year 2015-2016.Of these 300 MW, 200 MW of capacity is envisaged to be purchased by Energy Supply Companies (ESCOMs) of Karnatakato meet their Renewable Portfolio Obligations (RPO) which currently stands at 0.25% for FY 2010-11.

Further to our analysis of REC trading in April, The Hindu recently covered the same, and so did Business Standard, which mentioned that the REC price declined by 61.5% in just the second trade. We agree with their comment of REC Trading needing a 'booster'. However, we believe that booster will come in the form of more frequent compliance requirement - clearly, if the obligated entity has time till March 2012 to meet the compliance requirement, why bother spending the money now?