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 an encouraging sign. Most obligated entities had remained away from the market last month, as they don’t have to meet RPO compliance till March 2012. However, last months low prices also presented a bargain to the buyer – prices will certainly be higher in the last quarter of the year.

The pricing remained subdued in this session as well. Price realized on both exchanges was Rs 1,500/ REC, or the floor price. Part of the reason is the low volume last month – sellers were being conservative and wanted to ensure the sale of RECs. From our extensive on-ground experience, we can say that broad approach of market participants remains ‘wait-and-watch’. Market is still looking for signs of enforcement of the REC mechanism, and significant supply capacity is yet to see issuance (current trading is from only 3-4 projects, representing less that 30MW of capacity, as against over 400MW accreditated). Without a strong signal on the enforcement of RPO, we can expect low prices of RECs for some time.
There was no trading in Solar RECs.