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India’s Largest REC Trading Company
OPEN ACCESSOPEN ACCESSOPEN ACCESS
August 2013
Vol: XXXIIII
From Management‘s Desk
In this issue we focus on the status of RPO enforcement and the likely demand-supply scenario till March 2014. In the main article, we have analyzed the potential im-pacts of a disappointing Gujarat RPO order and assess the current RPO enforcement scenarios in greater detail. As we enter in last two quarters of this financial year, it is important that RPO enforcement is strengthened, as REC markets - with over 30 lakh inventory and clearing ratios in low single digits - are at the verge of total col-lapse. However, recent order from several states hint that significant demand may materialize before March 2014. In the August 2013 trading session, demand was abys-mally low and clearing volumes hit an all-time low. Au-gust marked one complete year i.e. 12 consecutive months of trading non-solar RECs at floor price. Al-though, volumes in solar REC markets increased mod-estly as compared to previous month, prices remained at floor. We hope that this issue will be an insightful read for you and as always we will be keen to hear your feedback. - Team REConnect
CO
NT
EN
T
RPO Enforcement: Enter-
ing a critical phase
Regulatory Updates
REC Trade Results
REC Project Stats
Green News
About REConnect
RPO Enforcement: Entering a critical phase
RPO Enforcement: En-
tering a critical phase About REConnect Green News REC Project Stats REC Trade Report Regulatory Updates
www.reconnectenergy.com Page 1
45%
Market Share
in REC Trading
PAN
India
Presence
2.1 GW
Projects under
management
Managing REC
Projects in
16
States
REC Enforcement: Entering a critical phase
Introduction
The RECs markets have over 30 lakh unsold RECs. At
current demand levels, this represents over 2 years
worth of RECs. Further, with the current high-wind sea-
son drawing to a close, we expect that by the end of
year another 20 lakh RECs will be issued. With clearing
volumes at an all-time low, and trading at floor prices
for the last 12 months, REC markets have all but totally
collapsed.
The primary reason for this is the lack of enforcement of
RPO by state regulators. The record on this has been
two small steps forward and one big step backward. For
example, in recent months, Maharashtra, Chhattisgarh,
Punjab and Delhi have all taken positive steps towards
RPO enforcement. However, the recent order from Guja-
rat, which waived RPO shortfall altogether, was a big
step backward.
In a recently concluded 37th meeting of the FOR,
Hon’ble Minister of State for Power Shri Jyotiraditya
Scindia addressed all the members of the forum. The
hon’ble minister took up three issues for discussions
among which, top priority was given to “RPO : Status of
compliance - suggestions for more effective enforce-
ment”. It can be inferred from the Minister’s speech that
the center is also keen on enforcing RPO.
Analysis of Gujarat Order on RPO -
On 8th August 2013, Gujarat came up with an order on
RPO which can have a far-reaching impact on the REC
markets. In the backdrop of some encouraging orders
from Maharashtra, Delhi and Chhattisgarh on the RPO
compliance front, Gujarat’s order is being seen as a step
backwards. In the recent order the regulatory commis-
sion of Gujarat has waived off the shortfall in RPO com-
pliance for FY13. GERC in taking such a decision has
agreed to the submissions of its obligated entities that
despite earnest efforts by the later there was not enough
supply available to meet RPO targets in totality. Hon’ble
commission in an order on Suo-motu petition no.
1219/2012 had allowed GUVNL to carry forward its RPO
targets of financial year 2011-12 and had mandated to
meet RPO targets of FY13 cumulatively.
GUVNL and TPL submitted that the following were the
reasons for non-compliance of RPO targets for FY12 and
FY13. Firstly, there were supply constraints as wind de-
velopers were not willing to sign PPA’s at preferential
tariff as for them REC mechanism deemed a lucrative op-
tion. As power procured by DISCOMs under REC mecha-
nism is not counted towards RPO compliance GUVNL
submitted that it was unable to comply with aforesaid
targets. Secondly, due to discontinuation of prevalent
benefits like AD and GBI, wind capacity addition in the
state (and India as a whole) had plummeted drastically.
As per details furnished in the recent order against a to-
tal power purchase requirement of 62,203 MUs of the
four DISCOMs, the shortfall of around 836 MUs was al-
The Hon’ble Minister took up three
issues for discussions among which,
top priority was given to “RPO :
Status of compliance - suggestions
for more effective enforcement”. It
can be inferred from the Minister’s
speech that the center is also keen on
enforcing RPO.
RPO Enforcement: Entering a critical phase
RPO Enforcement: En-
tering a critical phase About REConnect Green News REC Project Stats REC Trade Report Regulatory Updates
www.reconnectenergy.com Page 2
45%
Market Share
in REC Trading
PAN
India
Presence
2.1 GW
Projects under
management
Managing REC
Projects in
16
States
lowed to be carried forward to FY13. This shortfall was
16 % of the total renewable power these DISCOMs had
to buy to meet FY12 RPO targets. This shortfall would
have been met by purchasing 8,36,000 RECs from the
REC markets. In FY13, GUVNL had purchased 247 MUs
of additional RE power i.e. it had exceeded the RPO
targets of FY13 by 247 MUs but was not able to meet
the carried forward RPO targets completely.
This revision of RPO targets for 2012-13 has snatched
away from the REC markets, a significant demand of
over 5 lakh RECs. This demand is around 15 percent of
the total RECs available in the REC inventory which is
currently at 32 lakh RECs. To put in other words, if
GERC had not passed this order for RPO target revi-
sion, the REC markets could have easily expected a de-
mand of 5 lakh RECs, which is though not adequate
but would have brought significant upward push for
REC prices in the market.
The assertion that GERC put forward, in order to pro-
scribe meeting of shortfall of RPO of FY13 by purchas-
ing RECs seems abysmal. The order states that -
“From the above [reading of the CERC regulations], it
transpires that the REC was introduced for the fulfill-
ment of RPO for the States who are not having geo-
graphical conditions which is suited for RE generations
and due to which they are unable to comply with the
RPO envisaged in NAPPCCC and the Electricity Act,
2003. However, the State of Gujarat has very high po-
tential of wind and solar generation. But the distribu-
tion licensees in the State could not fulfill their non-
solar RPO due to lower capacity addition and unwill-
ingness of the Wind Generators to supply electricity at
the preferential tariff determined by the Commission.
Under such a condition, procurement of RECs, would un-
justifiably burden the consumers of the State.”
It is clear from these statements, that the commission
seems to have interpreted that RECs are only meant for
those states that do not have adequate RE resources.
This is despite its own regulation stating that RECs are a
valid way to meet RPO, and GERC also taking cognizance
of RECs in its order on RPO last year. .
A further risk from this order is that other states may also
be tempted to take this line of reasoning.
Enforcement Scenario
The enforcement scenario in major states of the country
can be summarized as in fig.1. On the basis of past en-
forcements, current action (notices sent), early enact-
ment of RPO regulation, high RE potential, and large REC
accreditations, the exhaustive list of RPO enforcement
was arrived at.
As per our analysis of the expected demand of RECs by
the end of the current financial year, an incremental de-
mand of over 42 lakh RECs is expected from the states of
Chhattisgarh, Maharashtra, Delhi and Punjab.
Owing to expected strong enforcements in select states
in the coming time, the prevalent supply-demand mis-
match scenario of REC markets is expected to improve.
The self explanatory graph in fig. 2 highlights the impact.
It can be seen that even after stricter enforcement orders
in select states, by the end of FY14 there will be a gap of
around 14 lakh RECs, as the supply continues to increase
exponentially with time.
RPO Enforcement: Entering a critical phase
RPO Enforcement: En-
tering a critical phase About REConnect Green News REC Project Stats REC Trade Report Regulatory Updates
www.reconnectenergy.com Page 3
45%
Market Share
in REC Trading
PAN
India
Presence
2.1 GW
Projects under
management
Managing REC
Projects in
16
States
Figure 1: Enforcement scenario in major states. *Court cases against RPO regulations in local High court/Supreme
Court in the case of Rajasthan
Figure 2 : Expected Demand-Supply of RECs.
* (Dotted lines) show projections as per REConnect’s analysis. Source - Recent T.Os and relevant orders on RPO
RPO Enforcement: Entering a critical phase
RPO Enforcement: En-
tering a critical phase About REConnect Green News REC Project Stats REC Trade Report Regulatory Updates
www.reconnectenergy.com Page 4
45%
Market Share
in REC Trading
PAN
India
Presence
2.1 GW
Projects under
management
Managing REC
Projects in
16
States
REC Markets - going forward
There is a a possibility of improvement in the REC markets following some major pronouncements on RPO front.
Issues that are expected to drive the markets in a positive direction are that : 1) APTEL process is entering last
phase, the order on the same is expected by the end of December’13 2) Tariff hikes in DISCOMs and 3) Increase in
open-access in AP/other states.
- end of article -
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Regulatory Updates
RPO Enforcement: En-
tering a critical phase About REConnect Green News REC Project Stats REC Trade Report Regulatory Updates
www.reconnectenergy.com Page 5
Punjab pushes PSPCL for RPO compliance by De-
cember’13
PSPCL has been asked to comply with its stipulated RPO
target for FY12, FY13 and FY14 cumulatively. In an order
dated 12 August 2013, Punjab regulator allowed PSPCL to
carry forward 114.80 non solar MUs and 25.8 solar MUs to
FY14, which is the cumulative shortfall for FY12 and
FY13. For the current fiscal (FY14), PSPCL has to purchase
around 400,000 RECs and the shortfall of 1,14,800 will
eventually entail over 500,000 RECs to be purchased by
end of December 2013.
With Maharashtra and Delhi also pushing for RPO on
similar lines, it is expected that the buy side participation
will improve in the poorly performing REC market.
For the copy of the order – Click Here
Delhi Discoms build RPO compliance costs into
their tariff
According to the most recent tariff orders, the DERC has
allowed Tata Power Delhi Distribution Limited, BSES Ya-
muna Power Limited, BSES Rajdhani Power Limited, New
Delhi Municipal Council to incorporate the cost of Renew-
able Purchase Obligation (RPO) for FY2013-14 in their tar-
iff. The details of their obligation are given in table below.
We see this as a good starting point. By including in its
tariff order, Discoms will essentially start to recover the
cost of RPO as part of the tariff it charges. This should
pave the way for RPO compliance (like in the case of Pun-
jab). However, it is too early to count compliance by Delhi
Discom’s as a certainty. Eventually, DERC will have to en-
force compliance. We will come to know of that after
March 2014. In the tariff order, the Discom’s and DERC
are silent regarding the extent of compliance in 2012-13.
MPERC issues fresh directives on RPO compli-
ance
Electricity regulatory commission of Madhya Pradesh, in
a fresh directive has ordered all DISCOMs of the state to
comply with RPO. Owing to unavailability of information
on power purchase from renewable sources by DIS-
COMs, the commission clarified that it was not in a posi-
tion to include its effect in recent orders. However, in this
fresh directive, MPERC has come up explicitly mention-
ing that any variation in power purchase costs will be
considered and correspondingly accounted for in the
true-up exercise.
This directive reads as -
“RPO compliance: Directive: The Commission has notified
regulation for Renewable Purchase Obligation (RPO), ef-
fect of which on power purchase has not been consid-
ered by the Commission in the present order as the peti-
tioner has not filed any availability of power from renew-
able sources. However, the petitioner is directed to en-
sure RPO compliance for FY 2013-14 as per RPO Regula-
tions and any variation in power purchase costs will be
considered during true-up exercise.”
MP plans to meet its RPO obligation completely by the
end of FY15 by purchasing 2500 MW as per an article in
India’s largest REC Trading Company
FY13
PSPCL/PEDA
Shortfall
(+/-) in
MUs
in MWh RECs re-
quired
Non Solar Obligation 114.8 114800 114800
Solar Obligation 25.8 25800 25800
Total 140.6 140600 140600
in MWh
Tata
Power
BSES
Yamuna
BSES
Rajdhani NDMC Total
Non So-
lar Obli-
gation 342190 255070 454710 61956 1113926
Solar Ob-
ligation 14880 11090 19770 2964 48704
Regulatory Updates….contd.
RPO Enforcement: En-
tering a critical phase About REConnect Green News REC Project Stats REC Trade Report Regulatory Updates
www.reconnectenergy.com Page 6
a Hindi Daily. For compliance of RPO by the end of
FY14, MP will need 14 Lakh non-solar RECs and 2,55,000
solar RECs.
For a copy of the relevant order click here.
MERC tightens RPO compliance & prevents inter-
changeability
In a landmark decision by MERC, it was brought forward
that the obligated entities of the state (i.e. DISCOMs,
Captive and OA consumers) will no longer have the
cushion of RPO waiver or interchangeability of solar and
non-solar RPO. Hon’ble commission has strongly as-
serted that all obligated entities in the state will have to
meet their RPO targets (cumulatively) before March
FY14, which means that all RPO targets from FY11- FY14
will have to met after clearing all previous backlogs.
Such a decision is a positive sign for the overall good of
REC market, which has already shown signs of increased
demand in the last trading session. The market is ex-
pected to conduct trading in August 2013 with an in-
ventory of around 30 lakh plus RECs. If more such deci-
sions from other state regulators are put in place, it
eventually will pick RECs from its hitherto floor price.
Relevant article in the Economic Times can be read here.
In another decision, the commission proscribed the in-
terchangeability of solar & non-solar RPO. The commis-
sion while taking a decision on the petition submitted
by Reliance Infrastructure Ltd. (D) referred to discussion
of 33rd FOR meeting in which the forum deemed such a
move as undesirable. The meeting had concluded that
interchangeability will put a lot of burden on obligated
entities and will in-turn affect consumers with undue
costs. RIL had petitioned that since it was unable to
comply with non-solar RPO targets, it must be allowed
to procure the surplus solar power available to offset
the same.
The commission responded that such a case is possible
only when solar power reaches grid parity. It also high-
lighted that such a move will also adversely affect the
growth and penetration of other renewable energy
sources. Regardless of varied stakeholder sentiments,
both these decisions can be rightly called as a step for-
ward towards promoting more renewable energy in
India.
Relevant article in The Guardian
- end of article -
India’s largest REC Trading Company
REC Trade Report - August 2013
RPO Enforcement: En-
tering a critical phase About REConnect Green News REC Project Stats REC Trade Report Regulatory Updates
www.reconnectenergy.com Page 7
Non Solar RECs
Markets continued to perform poorly as prices remained at floor for both non-solar and solar RECs. There were
major pronouncements this month on the RPO front which includes one of the most industrialized states like Ma-
harashtra, coming with a stern compliance order by the end of FY14. Owing to these developments, market per-
formance is expected to improve but only in last quarters i.e. Q3 and Q4 of FY14. REC inventory closed with
3187508.
For non solar credits, the clearing volumes, as compared to previous trading session (REC Trading Report – July
2013) plunged by 56% and 89 % at IEX and PXIL respectively. As evident in the chart below, the supply continued
to grow.
India’s largest REC Trading Company
For past trading history - CLICK HERE
0
500000
1000000
1500000
2000000
2500000
3000000
3500000
June'13 July'13 August'13
Buy Bid
Sell Bid
Volume Cleared
1500 1500 1500
1000
1500
2000
2500
3000
June'13 July'13 August'13
IEX
PXIL
REC Trade Report - August 2013
RPO Enforcement: En-
tering a critical phase About REConnect Green News REC Project Stats REC Trade Report
Regulatory
Updates
www.reconnectenergy.com Page 8
Solar RECs
As compared to July 2013, clearing volumes at both exchanges increased by a modest 16.2 %, however at IEX it fell
by 11.5 % and at PXIL the clearing volume jumped by 92.4 %. Supply almost doubled at IEX as total supply in the
market breached 30000 mark.
Prices at both exchanges was 9300 per solar REC. Price remained at floor, owing to demand-supply mismatch
with. It can be seen in the graph, that demand is same as cleared volume since last three months. The demand for
solar RECs will only increase if solar RPO (in particular) is enforced effectively.
India’s largest REC Trading Company
For past trading history - CLICK HERE
9300 9300 93009000
9500
10000
10500
11000
11500
12000
12500
13000
June'13 July'13 August'13
MCP-IEX
MCP-PXIL
0
5000
10000
15000
20000
25000
30000
35000
June'13 July'13 August'13
Total Demand
Total Supply
Total Volume cleared
REC Project Status - As on September 5th, 2013
RPO Enforcement: En-
tering a critical phase About REConnect Green News REC Project Stats REC Trade Report Regulatory Updates
www.reconnectenergy.com Page 9
Registered Capacity
3703.778 MW
India’s largest REC Trading Company
Projects Registered
State wise
Projects Registered
Source wise
All figures
in MW
All figures in
MW
Biomass
610.395
Small Hydro
197.5
Solar PV
162.68
Wind
2059.24
Bio-fuel
Cogeneration
672.295
Green News - National
RPO Enforcement: En-
tering a critical phase About REConnect Green News REC Project Stats REC Trade Report Regulatory Updates
Read More
India’s largest REC Trading Company
www.reconnectenergy.com Page 10
Less takers for renewable energy certificates this month
Reflecting lower demand, the number of Renewable Energy Certificates (RECs) available for sale outstripped their
demand on the Indian Energy Exchange this month. A total of 31,101 non-solar and 1,754 solar RECs were traded,
"with supply far exceeding demand yet again", according to Indian Energy Exchange (IEX). Non-solar RECs saw
just 31,101 purchase bids whereas the sale bids stood at 18, 72,449 during this month's trading session held yes-
terday, it noted. These certificates were sold at a price of Rs 1,500 each. "For solar RECs, buy bids of 1,754 RECs
and sell bids of 23,338 RECs were received against which 1,754 RECs were cleared at Rs 9,300 per REC," the lead-
ing power exchange said in a statement.
India’s most industrialized state pushes for clean energy
It's rare that cheery environmental news comes out of India, especially when it comes to clean energy. But a July
22nd order by the electricity regulatory authority of Maharashtra (MERC), India's most industrialized state, is being
welcomed as a possible game changer. The government has ordered 93 entities to attain renewable power obli-
gation (RPO) targets by March 2014, which include government distribution companies (discoms) as well as large
private consumers of electricity. Also significantly, companies that do not comply will be fined Rs 13.40 per unit
(about 13p), higher than ever before.
Demand for renewable energy certificates continue to dwindle
The fifth renewable energy certificate (REC) trading session of FY 14 held on 28th August, 2013, at IEX, saw IEX
being the platform of choice with 76% market share. The session featured the trade of 31,101 N-Solar and 1,754
Solar RECs with supply far exceeding demand yet again. For non-solar RECs, buy bids of 31,101 RECs and sell bids
of 18, 72,449 RECs were received against which 31,101 were cleared at Rs 1,500 per REC. For solar RECs, buy bids
of 1,754 RECs and sell bids of 23,338 RECs were received against which 1,754 RECs were cleared at Rs 9,300 per
REC.
India’s budget deficit threatens National Solar Mission
India's financial woes are likely to derail the country's ambitious National Solar Mission, widely seen as a model
solar development policy program. The current Indian government's current account deficit (CAD) of $98 billion is
steadily rising, as the much-touted gross domestic product (GDP) growth rate has come crashing down from
highs in the double-digits to under 4%. Consequently, the CAD-to-GDP ratio of 4.9% is also experiencing new
highs as the central government falters in bringing back confidence in the marketplace.
Low demand once again at REC trading session on energy exchange
The fifth Renewable Energy Certificate (REC) trading session of the current financial year witnessed supply far ex-
ceeding demand again. Trading on the Indian Energy Exchange (IEX) on Wednesday featured 31,101 non-solar
trades and 1,754 solar RECs .
Read More
Read More
Read More
Read More
India’s RPO Map
RPO Enforcement: En-
tering a critical phase RPO Map Green News REC Project Stats REC Trade Report Regulatory Updates
www.reconnectenergy.com Page 11
Status of Regulation - Final for all states.
^ data as per CSERC Draft RPO regulation.
RPO on OA Users? - Yes for all states.
Gujarat - Not Available.
Karnataka - Yes (> 5MW) 5.00% RPO.
West Bengal - Not Applicable.
RPO on CPP? - Yes for all states.
Gujarat - Yet to be notified.
Bihar, Haryana, Orissa, Jharkhand, Tripura, Karnataka(5.00% RPO) - Yes (> 5MW).
West Bengal - Not Applicable.
RPO Penalty? - Yes (RECmax) for all the states.
West Bengal - Not Specified.
** RPO targets are not determined for FY14 and are assumed to continue FY13 target levels.
* 10% + 0.25% (BESCOM,MESCOM,CESC), 7% + 0.25% for others.
States
2013-14 RPO
Obligation
(Non Solar)
2013-14 RPO
Obligation
( Solar)
Andhra Pradesh 4.75 % 0.25 %
Assam 5.40 % 0.20 %
Arunachal Pradesh 5.45 % 0.15 %
Bihar 3.50 % 1.00 %
Chhattisgarh 5.75 % ^ 0.50 %^
Delhi 4.60 % 0.20 %
Gujarat 6.00 %** 1.00 %** Haryana 2.90 % 0.10 % Himachal Pradesh 10.00 % 0.25 % J&K 4.75 % 0.25 %
Jharkhand 3. 00 % 1.00 %
Karnataka 10.00 % * 0.25 % *
Kerala 3.65 % 0.25 %
Madhya Pradesh 4.70 % 0.80 %
Maharashtra 8.50 % 0.50 %
Meghalaya 0.60 % 0.40 %
Orissa 5.80 % 0.20 %
Punjab 3.37 % 0.13 %
Rajasthan 7.20 % 1.00 %
Tamil Nadu 8.95 %** 0.05 %**
Tripura 0.90 % 0.10 %
Uttarakhand 5.00 %** 0.05 %**
Uttar Pradesh 5.00 %** 1.00 %**
West Bengal 3.90% 0.10 %
Goa & UTs 2.60 % 0.40 %
Manipur 4.75 % 0.25 %
Mizoram 6.75 % 0.25 %
Nagaland 7.75 % 0.25 %
India’s largest REC Trading Company
About REConnect
RPO Enforcement: En-
tering a critical phase RPO Map Green News REC Project Stats REC Trade Report Regulatory Updates
www.reconnectenergy.com Page 12
REConnect Energy is India’s leading renewable energy trading company. We provide end-
to-end services for projects in the Renewable Energy Certificate mechanism – from con-
tract structuring and advisory to monetization of RECs. We also work with consumers to
manage Renewable Purchase Obligation liabilities, and develop and execute their energy
sourcing strategy. We are a knowledge focused company that prides itself in providing
premium services to our clients backed by in-depth research and analysis.
REConnect is run by an experienced and professional team. The team consists of members
with relevant experience of working at IEX, L&T, JP Morgan, Arthur Andersen and Gensol.
Key members of the team are alumnus of IIT Bombay, Columbia University (an Ivy League
university) and IIT Kharagpur.
For more details of services provided and profile of the management team, please visit our
website.
Contact Details
Bangalore:
Vishal Pandya
Vishal.Pandya@reconnectenergy.com
# 4123, 6th Cross, 19th Main,
HAL 2nd Stage, Indiranagar,
Bangalore 560008.
O : 080 - 6547 3383 / 84
F : 080 - 30723571
New Delhi:
Vibhav Nuwal
Vibhav.Nuwal@reconnectenergy.com
# 216, Nirvana courtyard, Nirvana
Country, Sector 50,
Gurgaon 122018.
O : 0124 - 4103216
F : 080 - 30723571
Chennai:
Rajesh Vaidyula ( +91 9940478306 )
Rajesh.Vaidyula@reconnectenergy.com
# 18/1 (88), 2nd Floor, Aarya Gowda
Road, West Mambalam,
Chennai - 600 033.
Hyderabad:
Bhanu Tejja
( +91 7799874036 )
Bhanu.Tejja@reconnectenergy.com
Solar Market:
Anurag Dhyani
( +91 7760300499 )
Anurag.Dhyani@reconnectenergy.com
India’s largest REC Trading Company
Mumbai:
Ram Kumar ( +919930359992 )
Ramkumar@reconnectenergy.com
Haware Fanatasia
Business Park,
F 159, Plot no. 47,
Sector 30-A, Vashi,
Navi Mumbai 400703.
Renewable Purchase Obligation (RPO):
Chetan Singh Adhikari ( +91 9910772666 )
Chetan.Adhikari@reconnectenergy.com
Renewable Regulatory Fund (RRF):
Anuj Xess ( +91 8447501998 )
Anuj.Xess@reconnectenergy.com
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