Green power producers find dealing with RECs unviable in Karnataka.
An article regarding Karnataka Electricity Regulatory Commission's guidelines which is not in sync with those of the Central Electricity Regulatory Commission (CERC) was highlighted in The Hindu Business Line. The KERC guidelines are also not clear in specifying eligibility criteria. “They do specify intra/inter state open access eligibility criteria for the Renewable Energy (RE) Generator when it sells RE power to a consumer,” says Mr. Santosh Kamat, Co-founder of Auromira Energy, a company that produces electricity from renewable sources. RE producers see a mismatch between the KERC guidelines and those given by the CERC. With regard to eligibility of captive generators for RECs, while the CERC says that captive generators who avail themselves of other benefits such as preferential tariff are not eligible, the KERC guidelines say that such parties are eligible, says Mr Vishal Pandya of REConnect Energy Solutions, a company which provides services in RECs, energy efficiency and electricity portfolio management.
REC Trading Update – July 2011
REC Trading has been picking up gradually. Both the volumes traded and the price showed some improvement over the last month – approximately 18,500 Non-solar RECs were traded this month, as compared to 16,000 in June. Price also showed marginal improvement,
Significant Changes are Proposed in the REC Mechanism
NLDC and Central Board of Irrigation and Power (CBIP) organized a day-long workshop on the REC mechanism in Delhi in June. Shri Pramode Deo, Chairman CERC was the key note speaker at the event. In his speech, he gave a preview
Review of REC Trading-June 2011
Compared to REC Trading for last month, this month saw a larger level of participation from buyers in REC market. For example, in this trade session, IEX witnessed 72,002 RECs* from buy side whereas, PXIL saw demand of 10,000 RECs.
States Need to do More to Provide Open Access
Planning Commission deputy chairman, Montek Singh Ahluvalia has said "states need to make all-out efforts to expedite reforms in power distribution and do more to provide open access". His comments were were made meeting with Western region states which was part
RPO Compliance May be Required More Frequently
After the low trading volumes in April, we strongly advocated quarterly compliance in order to make the REC market functional. Now it has been reported that the CERC has been actively considering such a proposal (See Business Standard article here). An
Significant Jump in REC Trading Volume in May
Review of REC Trading – May 2011 After a slow start, REC Trading picked up this month. There was a significant increase in the volume – combined volumes on both exchanges was 18,500 RECs (representing 18.5 million units). This is
REC Trading Off to a Slow Start
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?
Lessons to learn from REC Trade in April-2011
India witnessed first ever trade of REC in March 2011 where 424 Non-Solar RECs got traded collectively through Indian Energy Exchange (IEX) and Power Exchange India Limited (PXIL) at Market Clearing Price (MCP) of Rs. 3900/REC and Rs. 2225/REC respectively. Market got super excited seeing REC prices touching forbearance price at IEX. However, the market got little surprise as well as shock in the very next trade session that got executed in April-2011, in which buyers were hard to find at both the Power Exchanges (PXs). Based on its existing strong hold in the market, IEX managed to get 260 Non-Solar RECs from buy side whereas their counterpart – PXIL could not get a single bid from REC buyers! This came as a little surprise to us (REConnect) as well as the market. We were expecting that the market would see a strong dip in the price due to following factors:
- Most of the distribution companies & obligated entities might still be busy settling their financial accounts
REC Mechanism and Structuring Sale of Electricity for Benefit Maximization
Renewable Energy Certificate Mechanism provides few additional options to RE generators to structure their electricity sale to maximize their profit. Structuring the sale of electricity can play an important role in maximizing the benefits of a particular project. A Renewable Energy Generator can have multiple options to manage electricity sale. Each option has its own advantages and limitations. The options can be listed out as:
- Sale to DISCOM at Preferential Tariff: PPA with a DISCOM is a very basic option which can assure guaranteed ROI over a longer duration. This can be a benchmark to evaluate other options against.
- Sale to DISCOM at Average Power Purchase Cost: Sale to DISCOM at Average Power Purchase Cost can assure a guaranteed return with an additional income from GBI, but the tariff is low when compared to the preferential tariff. This drop in tariff can be compensated by additional revenue from RECs.
- Third Party Sale/ Open Access: Detailed analysis is required while going for Third Party Sale or Open Access as this may involve higher risks and other applicable charges as well. The charges may include Transmission Loss, Transmission Charges, and wheeling Charges. Cross Subsidy charges may also be eligible and will have a considerable effect on the price if implemented. The advantage with Third party Sale/ Open access is that the tariff may be comparatively higher and the generator is allowed to avail RECs as well.
- Captive/ Group Captive Consumption: Most of the states allows RE generators to consume electricity generated as a captive consumption by paying nominal wheeling and banking charges (in case of wind/small hydro). As per CERC regulation, when RE generation is used for captive consumption and promotional benefits are availed (promotional wheeling and banking), RE generator becomes ineligible to participate in REC mechanism.