REC Update - November 2013

Highlights:
Non-solar REC demand doubles to 3 lakh RECs with 7.5% clearance (4% on IEX & 12% on PXIL) Both demand & supply of Solar RECs decreased by 86% and 20% respectively Overall monthly issuance continued to be low at 4,03,111; a decrease of 21% Total both exchanges traded 3,08,928 RECs with 42,04,605 RECs carried forward Market value increased to INR 53.18 Cr, a 70% increase from last month

Analysis of Non-Solar REC trading:

4,00,175 Non Solar RECs were issued this month showing a decrease of 21%. Volume IEX Stable Buy demand at 98,921 compared to 97,743 RECs in Oct PXIL Buy demand continued to increase by 4 times from 51,719 in October to 2,11,185 RECs. The total demand of RECs doubled as compared to October session. The total supply reached 41,39,565 from 38,86,396 showing a 7% increase from last month. At the end of session 38,84,640 RECs remained untraded on exchanges.
Traded Price (Wt) Traded Qty 1,500 3,08,928 Buy Qty Sell Qty Non Solar 3,08,928 41,39,565 IEX PXIL IEX PXIL IEX PXIL IEX PXIL 97,743 2,11,185 27,60,452 13,79,113 1,500 1,500 97,743 22,11,185

Total of 3,19,462 RECs did not participate in the trade, compared to 3,23,096 last month, showing a bit decrease in non participation. Price Price on IEX and PXIL remained at floor level, i.e. INR 1,500.

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Analysis of Solar REC trading:

Buy bids on both the exchanges showed contrasting clearing percentages; while PXIL showed a decrease in clearance (only 2%), IEX cleared at 15% of the supply volume. Volume
Solar

This month buy demand for Solar showed a 21% decrease to 7,354 from 9,257 RECs. Sell also showed a decrease of 10% to 61,357 from 67,954 RECs.

Buy Qty Sell Qty Traded Price (Wt) Traded Qty

7,354 61,357 9,300 7,354

Total Solar REC clearance ratio decreased from 13.63% to 12%

IEX PXIL IEX PXIL IEX PXIL IEX PXIL

6,983 371 45,819 15,538 9,300 9,300 6,983 371

Price The Solar RECs continued to be traded at floor price i.e. INR 9,300.

Overall the untraded 38,84,640 (solar & non solar) plus non participant 3,19,965 i.e. a total of 42,04,605 RECs will be carried forward to the next trade session on 26th December 2013.

Other Market Updates:

Joint Electricity Regulatory Commission order for RPO Compliance
Immediately after the land mark order given by the honorable MERC on the enforcement and strict compliance of the RPO including the Distribution Licensees, including the entire backlog upto FY 2012-13 and for the current FY 2013-14, the honorable Joint Electricity Commission for the state of Goa and UTs (Union Territories) which regulates the Electricity Departments of Goa, Andaman & Nicobar, Chandigarh, Dadra & Nagar Haveli, Daman & Diu, Lakshadweep and Pudducherry has also reviewed their previous order in this regard and has given strict instructions to obligated entities to comply with their RPOs by 31st March 2014 and to submit their compliance report by 20th December 2013. This order is seen as a major initiative towards compliance of RPO and will boost the confidence of the RE investors especially in Solar and the bankers and financers in the REC mechanism.

MSEDCL's petition to MERC for waiver of FY12-13 RPO

MSEDCL has filed a petition with MERC for waiver of its FY 12-13 RPO target. This is similar to GUVNLs petition which was later approved by GERC. If MERC also allows this RPO waiver it would be a great dampener for the REC market and its prospects. The main prayers of the Petitioner are as under:

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1. The RE being infirm in nature, the RPO target may be considered as per the actual contracted RE capacity and not as per the actual units injected. 2. The surplus units while meeting the Non- solar RPO target for FY 2010-11 and FY 201112 of MSEDCL may be allowed to be considered and adjusted in meeting shortfall of the non-solar RPO Mus for FY 2012. 3. The remaining shortfall be waived in the interest of the common consumers. 4. If MSEDCL is required to procure RECs for fulfilling the RPO target, it will lead to financial burden on common consumers of MSEDCL. Thus, MSEDCL may not be compelled to procure RECs. 5. MSEDCL has contracted more than sufficient quantum of RE power so as to meet the RPO target on the basis of CUF decided by MEDA and approved by MERC. In case, if penalty is levied for non compliance of RPO, the same may be recovered from the RE generators by MERC. 6. The Solar Power procured at APPC rate, as a promotional activity may be allowed to be considered for meeting the solar RPO target of MSEDCL. 7. Pass any other order as may be deemed fit in the interest of justice and in the interest of promoting Non Conventional Energy Sources, at the same time, protecting MSEDCLs commercial interest and to save common consumers of MSEDCL from financial burden.

CERC Cleared UP Sugar Issuances

In an order dated 14th November 2013, CERC decided to do away with the matter of pending REC issuances for Cogeneration plants in the state of Uttar Pradesh. The order quotes This Commission has taken the pioneering initiative by introducing renewable energy certificates under the REC Regulations in order to encourage renewable sources of energy. The Commission in its order dated 18.10.2012 and 8.1.2013 had clarified about the eligibility of the cogeneration plants for grant of REC. Subsequently, the Commission has made appropriate provisions in the REC Regulations through amendment and has also done away with the disqualification based on availing waiver of electricity duty. Therefore, the approach of the Commission all along is to encourage promotion of renewable sources of energy. Considering the overall objective and perspective of the REC Regulations, we are of the view that RECs should not be denied to the co-generation plants including the petitioner on the ground that the co-generation plants are not required to pay the electricity duty in the State of UP. These issuances were stuck since November 2011. Thus in the coming months, the REC market will see huge issuances from the sugar industries.

Industry miffed as MERC allows higher cross subsidy charge

In what may be a gain for farmers, but a loss for the manufacturing sector, Maharashtra Electricity Regulatory Commission has approved a hike in cross subsidy surcharge (CSS) from Rs 1.18-1.60 per unit to Rs 2.30-2.75 a unit respectively. This has left the industries miffed. CSS is charged on purchases from open market to bridge the gap. After adding the increased CSS, power from open market becomes almost equal to MSEDCL.

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India likely to see 1,750-MW (including the delayed 420 MW CSP projects) solar capacity addition next year
Indicating better sectoral prospects, India is projected to see a solar power generation capacity addition of 1,750 MW next year, says a report. Noting that new solar installations so far this year have been around 900 MW, Mercom Capital Group said that India is not likely to register any significant year-over-year growth for 2013. However, during this period, global solar market is estimated to see 20 per cent growth. "...our preliminary estimates are tentatively at 1,750 MW of solar installations in India for 2014. "Although the projected installation growth looks impressive, it includes 420 MW of CSP (Concentrated Solar Power) projects that did not get installed in 2013," Mercom Capital said in a statement. Going by estimates, the operational capacity, comprising solar photo voltaic and solar thermal, is little over 2,000 MW.

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