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

EVOLUTION OF PERFORM ACHIEVE & TRADE (PAT)

INTRODUCTION TO PAT SCHEME  The EC Act was amended on 24 th 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 30 th March, 2012   G.S.R. number 269 (E) dated 30 th 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….Cont.  Quantified energy savings are converted into Energy Saving Certificates (ESCerts). Purchase ESCert or pay penalty ESCert issued Trade of ESCert Cost effective instrument for energy efficiency improvement 

PAT Cycle I – ACHIEVEMENTS Saving of about 8.67 MTOE from the assessed 427 DCs (5.24%) CO 2 mitigation - 31 million tonne

PAT Cycle II – NOTIFIED SECTORS 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 2 nd PAT Cycle (by 2018-19)

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 oil 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 (2 nd 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 Designated Consumers 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

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

ESCert CERTIFICATE NUMBER - FORMAT CYCLE - S No. - DC Registration - Issued – Date Number [DDMMYY] 01 - 00000001 - TPP0001MH - 170916 01-00000001-TPP0001MH-170916

PROGRESS SO FAR…. • Issuance of Central Electricity Regulatory Commission (Terms and Conditions for Dealing in Energy Savings Certificates) Regulations, 2016 on 27 th 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

MARKET GENESIS OF ESCerts Power System Reforms-EA 2003, Power Market Regulation 2010 Regulatory Structural changes- NAPCC-2008, NMEEE, EC Act, PAT Scheme, INDC, Norms & standard assigned to Designated Consumers under Emergence of Uniform PAT rules and EC-Act Standards- Evidence of Definition of ESCert, issuance & exchange of ESCerts with ownership/legal ownership right, instrument for transfer Development of Future linking of ESCerts with CERs or REC, bilateral trading informal spot markets. Emergence of Exchange Two power exchange under regulation of CERC based trading Creation of organized futures markets and options Proliferation of over-the- counter markets

ESCert MARKET ARCHITECTURE  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 COMMODITISATION 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’s EFFECTIVE DELIVERY MECHANISM  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

ENTITIES INVOLVED IN ESCerts TRADING MECHANISM  Bureau of Energy Efficiency 7 7 (BEE) PXs 3 6  Central Electricity 4 5 Regulatory Commission (CERC) CERC  Registry (POSOCO) EE  Power Exchanges (PXs) BEE  Eligible Entity (EE) 1 8 ` PATNet [Designated Consumers REGISTRY DC (DC)] 2

ENTITIES INVOLVED IN ESCerts TRADING MECHANISM 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.

ESCerts TRADE/EXCHANGE REGULATIONS 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 EXCHANGE REGULATIONS - DEFINITIONS  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.