ESCerts Trading under PAT Scheme Girja Shankar Assistant Energy - - PowerPoint PPT Presentation

ESCerts Trading under PAT Scheme

Girja Shankar

Assistant Energy Economist

BUREAU OF ENERGY EFFICIENCY

(A Statutory body under Ministry of Power, Government of India) 4th Floor, Sewa Bhawan, R. K. Puram, New Delhi – 110 066

EVOLUTION OF PERFORM ACHIEVE & TRADE (PAT)

 The EC Act was amended on 24th August 2010 authorizing Central Government

 to issue Energy Savings Certificates (ESCerts) u/s 14A

 to specify the value of energy u/s 14 B .

 Prescribed Energy Consumption Norms and Standards notified vide



• S. O. number 687(E) dated 30th March, 2012

 G.S.R. number 269 (E) dated 30th March 2012.

 PAT Cycle I covers 478 Designated Consumers (DC) of eight energy intensive sectors :

 Aluminum, Cement, Chlor-alkali, Fertilizer, Iron and Steel, Pulp and Paper, Textile and Thermal power plant  Targeted reduction in the average energy consumption by 2014-15:- 4.05%  Annual energy saving of about 6.686 million tonnes of oil equivalent (mtoe)  Annual reduction of carbon dioxide emission is about 23 million tonnes

INTRODUCTION TO PAT SCHEME

 Quantified energy savings are converted into Energy Saving Certificates (ESCerts).  Trade of ESCert Cost effective instrument for energy efficiency improvement

INTRODUCTION TO PAT SCHEME….Cont.

Purchase ESCert

• r pay penalty

ESCert issued

Saving of about 8.67 MTOE from the assessed 427 DCs (5.24%) CO2 mitigation - 31 million tonne

PAT Cycle I – ACHIEVEMENTS

PAT Cycle II – [2016-2019] Baseline Year: 2014-15 Assessment Year: 2018- 19 Total Energy Consumption from 11 sectors: 227 mtoe National Target = 8.869 mtoe at the end of 2nd PAT Cycle (by 2018-19)

PAT Cycle II – NOTIFIED SECTORS

ENERGY SAVINGS CERTIFICATES (ESCerts)

 The energy savings certificate shall be issued in electronic form.  The value of one energy savings certificates shall be equal to one metric ton of

• il equivalent of energy consumed.

 The designated consumer who has been issued energy savings certificates may sell them through the power exchange. Each certificate will be unique tradable commodity which will be traded in two exchanges  The designated consumer who has been issued the energy savings certificates during the current cycle may use them for the purpose of banking until the next compliance cycle after which they stand expired.

REC v/s ESCerts

REC ESCerts

Cycle 1 year 3 years Life of Certificate 365 days (2nd time extended to 1095) Closure of second Cycle (> 3 years) Target State specific set by SERC Plant/DC specific, set by GoI Unit 1MWh equivalent 1 Toe Energy Conserved Buyers Obligated Entities (Discoms, CPPs and OA Consumers) Designated Consumers falling shortfall of Target Sellers Qualified Renewable Generators Designated Consumers surpassing Target Banking No Yes (1 Cycle) Floor Price Yes No Forbearance Price Yes No Regulator CERC (Trading) & SERCs (Compliance) BEE(Scheme) & CERC(Trading) Penalty SERCs SERCs Issuance Central Agency (POSOCO) MoP

PROCESS FLOW FOR ISSUANCE OF ESCerts

Electronic ESCert issuance instruction DC Account ESCert issuance Targets Form-A & B Form-A &B with comments for issuance, if over achieved ESCert credit to a/c Recommendation for ESCert issuance Central Government Registry BEE (Administrator) SDA(s) Designated Consumer PATNet Portal

PROCESS FLOW FOR ISSUANCE OF ESCerts Cont...

CYCLE

• S No.
• DC Registration

Number

• Issued –Date

[DDMMYY] 01

• 00000001
• TPP0001MH
• 170916

01-00000001-TPP0001MH-170916

ESCert CERTIFICATE NUMBER - FORMAT

• Issuance of Central Electricity Regulatory Commission (Terms and Conditions for Dealing in

Energy Savings Certificates) Regulations, 2016 on 27th May, 2016

• Draft Procedures on:

– Registration of Designated Consumer as Eligible Entity – Interface activity between different entities involved in exchange of ESCerts

• Up-gradation of IT Platform

– PATNet Portal including M & V process, ESCerts Issuance, Check Verification Process, Trading, Compliance Process, Banked ESCerts. – CRM Portal (In Progress) including Registration of Eligible Entity and Trading Activities

• MoP authorized official for online issuance, advised CERC for market regulation, directed

POSOCO for Registry function

• Determination of value of one ESCert
• Manual on Penalty & Adjudication Process

PROGRESS SO FAR….

MARKET GENESIS OF ESCerts

Regulatory Structural changes-

Power System Reforms-EA 2003, Power Market Regulation 2010 NAPCC-2008, NMEEE, EC Act, PAT Scheme, INDC,

Emergence of Uniform Standards-

Norms & standard assigned to Designated Consumers under PAT rules and EC-Act

Evidence of

• wnership/legal

instrument for transfer

Definition of ESCert, issuance & exchange of ESCerts with

• wnership right,

Development of informal spot markets.

Future linking of ESCerts with CERs or REC, bilateral trading

Emergence of Exchange based trading

Two power exchange under regulation of CERC

Creation of organized futures markets and

• ptions

Proliferation of over-the- counter markets

 Existing regulatory framework is the basis for existence of ESCert market  Transparent & clearly defined regulatory attributes

 Mandate  Administrator & regulator  Timelines of mandate  Consequences of non-compliance  Interlinking between PAT cycles  Streamlined and straightforward process for ESCert issuance

 Standardization of baseline, quantification, normalization and monitoring methodologies for various mandated sectors

ESCert MARKET ARCHITECTURE

ESCert already have standardized Commodity attribute that allows economic gains from trade/ exchange

• Standardization
• Specifying quality attributes of the deliverable commodity
• Allows buyers and sellers to focus on price negotiation
• Trading Unit
• Smallest indivisible unit for transactions equal to One (1) ESCert
• Price Basis
• Quoted in Indian Rupees

ESCert COMMODITISATION

• ESCert contracts are designed with physical delivery features
• MoP designated POSOCO as Centralized Registry for ESCerts exchange
• Developed a secure internet-based infrastructure
• to enable 24x7 accessibility of account
• ESCerts assigned with unique individualized serial numbers
• according to International standards with 100% tracking features in each

session of exchange

ESCert’s EFFECTIVE DELIVERY MECHANISM

 Bureau of Energy Efficiency (BEE)  Central Electricity Regulatory Commission (CERC)  Registry (POSOCO)  Power Exchanges (PXs)  Eligible Entity (EE) [Designated Consumers (DC)]

ENTITIES INVOLVED IN ESCerts TRADING MECHANISM

2 3 4 5 1 7 7 6 8 `

EE PXs DC REGISTRY BEE PATNet

CERC

COMMISSION:  CERC is Market Regulator for development of ESCert Market.  Central Electricity Regulatory Commission (CERC) defines the regulatory framework for trading of Energy Savings Certificate.  MoP agreed to issue the advisory to CERC to frame Regulations and issue necessary Orders / Guidelines. POWER EXCHANGE:  Power Exchange means the power exchange as defined in Power Market Regulations of the Commission.

ENTITIES INVOLVED IN ESCerts TRADING MECHANISM

Central Electricity Regulatory Commission (Terms and Conditions for Dealing in Energy Savings Certificates) Regulations, 2016

OBJECTIVE: To define a framework for trading of Energy Savings Certificate on Power Exchanges to facilitate the trading component of Perform, Achieve and Trade (PAT) scheme under NMEEE.  The Regulation covered

 definitions,  functions of the Commissions & the Bureau,  Category of Certificates,  dealing of ESCerts,  pricing of Certificate,  fees and charges,  market oversight, power to Relax.

ESCerts TRADE/EXCHANGE REGULATIONS

 EXCHANGE OR TRADE OF ESCerts: Sell or purchase of ESCerts under the Perform, Achieve and Trade (PAT) scheme on Power Exchanges, Including the delivery of ESCerts.  ELIGIBLE ENTITY: Any Designated Consumer registered with Registry who has been issued or deemed to have been issued ESCerts and desire to sell or purchase ESCerts for compliance with the energy consumption norms and standards under clause (g) of section 14 of the EC Act.  POWER EXCHANGE: Means the power exchange as defined in Power Market Regulations of the Commission.  POWER MARKET REGULATIONS: Power Market Regulations means the Central Electricity Regulatory Commission (Power Market) Regulations, 2010 and as amended from time to time.  REGISTRY: Registry means POSOCO or any other agency appointed by the Commission for management of exchange of ESCerts.

ESCerts EXCHANGE REGULATIONS - DEFINITIONS

 Define detailed procedure in consultation with the Registry: (i) Interface activities between Power Exchanges and Registry, Administrator and Registry and Registry and Designated Consumer (s); (ii) Registration of eligible entities; and (iii) Dealing, transfer and other residual matters.  provide assistance to the Commission in the matters involving transaction of ESCerts  disseminate relevant market information to all stakeholders  monitor to ensure that transaction in ESCerts takes place in a transparent manner,  provide relevant information regarding Designated Consumer(s) to the Registry  adhere to all compliance under EC Act pertaining to ESCerts  signing of Non Disclosure Agreement with the Registry  coordinate with the Software developer/agency who maintains the IT portal  intimate the Registry regarding the extinguishment of ESCerts from the accounts of the concerned Eligible Entity;  coordinate with the Power Exchanges and Registry for smooth interface for transaction of ESCerts;

ROLE OF ADMINISTRATOR

 Registration of Eligible Entity;  Maintaining records of ESCerts viz., issuance, dealing, etc;  Dissemination of information in coordination with the Bureau ;  Assistance in development of IT Platform for maintaining database of ESCerts;  Signing of Non Disclosure Agreement with the Administrator ; and  Any other function, as assigned by the Commission in consultation with the Bureau, after assessment of the prevailing market conditions.

ROLE OF REGISTRY

 Exchanges provide standardized procedures and regulated market conditions  Aggregate market interest in one platform  Provide efficient price discovery  Provide clearing function by assuming default risk of transaction  Ensure financial integrity of market participants  Provide professional management of Trading Ecosystem

ROLE OF POWER EXCHANGES

 Exchange of ESCerts shall be in accordance with the rules and bye laws of respective Power Exchanges.  The frequency of exchange of ESCerts shall be on monthly basis or in such periodicity as approved by the Commission.  All eligible entities who intend to participate in the exchange of ESCerts shall register themselves with the Power Exchange.  Eligibility Entity can exchange the ESCerts either directly on a Power Exchange

• r through a Member of a Power Exchange.

 The matching mechanism on Power Exchanges for ESCerts exchange shall be closed bid double-sided auction  In any trading session, an eligible entity shall not place sale bids in excess of total ESCerts held in its Registry Account. In case of breach, such eligible entities shall be treated as defaulter and any bid submitted by such eligible entity shall not be considered by the Power Exchange for the purpose of price discovery.

DEALING IN ENERGY SAVINGS CERTIFICATE (ESCerts)

 Application Form for Registration of Designated Consumer to become Eligible Entity shall contain the following information:  PAT Cycle Details  Owners Details  Details of Fees and Charges  Declaration  Attachments (Scan copy of PAN, TAN, CIN, Service Tax Number, Authorisation letter)

APPLICATION FORM TO BECOME ELIGIBLE ENTITY

 Coordinate with the Registry and shall be responsible to submit the information in a timely manner so as to enable Registry to comply with requirements for Registration within the time frame envisaged under CERC ESCerts Exchange Regulations.  Pay one time non-refundable registration fee and cycle fee/charges as determined by the CERC from time to time.  Comply with the duties and obligations specified by the Registry.  Follow directions given by any other competent authority from time to time.

ELIGIBLE ENTITY – ROLE & RESPONSIBILITIES

ESCerts TRADING ACTIVITY FLOW

Task Sequen ce Activity Responsible Entity Day Time Frame 1. DC registers to become Eligible Entity (EE) DC 0th Day 15 Days 2. Registry registers DC as EE Registry 1st Day 30 Days 3. Database of issued ESCerts is created for the respective EE D-CRM 1st Day 30 Days 4. Registry approve the Eligible Entity Registry 30th Day 1 Day 5. Publish - Certificate of Registration on PATNet (D – CRM) Registry 30th Day 1 Day 6. Certificate of Registration is uploaded in each DC’s dashboard on PATNet Portal Software 30th Day 1 Days 7. Register with Power Exchange for trading of ESCerts DC 30th Day 45 Days

ESCerts TRADING ACTIVITY FLOW

8. Any EE directly or through any power exchange member place their sell or buy bids on the Power Exchange(s) DC/Power Exchange 10:00 – 12:00 9. Each Power Exchange uploads the ‘Cumulative Sale Bids’ through their account on PATNet (D – CRM) Verifier PXs 12:00 – 12:30 Approver 12:30 – 13:00 Software 13:00 – 13:15 10. Cross-check the cumulative sale bids placed on Power Exchanges with availability of ESCerts in respective Registry account(s) Verifier Registry 13:15 – 13:45 Approver 13:45 – 14:15 Software 14:15 – 14:30 11. Cross – check report is generated in the Registry Account Software 14:15 – 14:30 12. Registry publish the cross-check report to both the Power Exchanges Registry 14:30 – 15:00 13. PX(s) receives and download the cross-check report from their PATNet (D-CRM) account PX 15:00 – 15:30

ESCerts TRADING ACTIVITY FLOW

14. Trading of ESCerts takes place in the respective Power Exchange in accordance with the CERC approved procedures. PXs 15:30 – 16:30 15. Each Power Exchange uploads the ‘Confirmation Report’ on PATNet (D-CRM) account Verifier PXs 16:30 – 17:00 Approver 17:00 – 17:30 Software 17:30 – 17:45 16. Registry receives the ‘Confirmation Report’ from both the Power Exchanges Registry 17:30 – 17:45 17. Registry sends the ‘Trade Approval Acknowledgement’ to each Power Exchange Registry 17:45 – 18:15 Software 18:15 – 18:30 18. Registry triggers the ‘Generate Transaction Certificate’ Button Registry 17:45 – 18:15 Software 18:15 – 18:30 19. Registry triggers the ‘Upload –portal’ Button Registry 17:45 – 18:15 Software 18:15 – 18:30

ESCerts TRADING ACTIVITY FLOW

20. Software update the ‘Trading Tab’ of the respective DC

• n PATNet portal with the details of quantity of ESCerts

traded on any the exchange, closing balance (Sell | Purchase), opening balance (Sell | Purchase) for the next trading session Software 18:15 – 19:00 21. Software upload the “Balance Certificate’ to the respective DC dashboard on PATNet Portal Software 18:15 – 19:00 22. Registry triggers the ESCerts Allocation Mechanism – (Button) Registry 18:30 – 19:00 Software 19:00 – 19:15 23. Evacuation of ESCerts from the Seller’s Registry Account – Based on FIFO Concept Software 19:00 – 19:15 24. ESCerts Allocation to the Buyer’s – Based on Queuing Theory Software 19:00 – 19:15

• 25. Registry receives the acknowledgement of “ESCerts

Allocation” Software 19:15 – 19:30 26. Registry can view the ownership of each ESCert through their D – CRM account in the KYE (Know Your ESCerts) Tab Software 19:15 – 19:30

5 4

DC (Buyer) DC (Seller)

Buy Bid (13:00 to 15:00) Sell Bid (13:00 to 15:00)

1

PX Member

Power Exchange(s)

Market Clearance (Volume & Price) by 16:30

Reports

Confirmation & Shortages, if any (by 16:00)

Registry

Sell Bids for verification (by 15:30)

2 3 6

Trade Results (by 17:00) A/C Update

• n

PATNet

#The time shown above is the tentative time.

Market Regulator: CERC

PROCESS FLOW FOR ESCerts TRADING

ESCerts TRANSFER OWNERSHIP

ALM0000MH CYCLE I CYCLE II

• S. No

ESCerts Issued Trading Session I Trading Session II Trading Session I Trading Session II 1 01-00000001-ALM0001MH- 170916 TPP0057TN IX 2 01-00000002-ALM0001MH- 170916 TPP0057TN IX 3 01-00000003-ALM0001MH- 170916 TPP0001MH PX 4 01-00000004-ALM0001MH- 170916 5 01-00000005-ALM0001MH- 170916 TXT0001RJ PX

ADJUDICATION PROCESS FLOW

ENTITIES INVOLVED: FOR : Forum of Regulators; SERC : State Electricity Regulatory Commission AO : Adjudicating Officer SDA : State Designated Agency BEE : Bureau of Energy Efficiency AT : Appellate Tribunal CP : Concerned Person

 Forbearing and floor prices  Reduction in the transaction cost to DCs  IT related issue-fail safe mode of operation of software, non editable audit trail

• f all activities

 Transparent and flawless exchange of ESCerts  Multiple rolling cycles  Liquidity of ESCerts  Bilateral trading  Inclusion of non-compliance players (Financial institutions, traders, other entities etc.)

CHALLENGES

 Address the Challenges  Making mechanism simple and transparent,  Reduction of transaction cost to DC  Linking of ESCerts to other similar products (RECs & CERs)  Tax and accounting treatment of ESCerts

CONCLUSION

THANK YOU

BUREAU OF ENERGY EFFICIENCY

A Statutory body under Ministry of Power, Government of India

4th Floor, Sewa Bhawan, R. K. Puram, New Delhi – 110 066

Ph: +91- 11- 2617 9699 | Fax: +91- 11- 2617 8352 | Email: gshankar@beenet.in

तेन (मस्थ ऊरॎजा को ) त्रक्थेन (त्रजग क े ज ) म ुःरॎी: ( उपोग करे )

• ----ईजवजस्रोपननषद