IEX REC Market: An Overview March 2019 1 For Public Use In this - - PowerPoint PPT Presentation

IEX REC Market: An Overview March 2019

For Public Use 1

In this presentation

Installed RE Capacity

Source: CEA , MNRE

350,162 MW Total Installed Capacity as of Februaty’19 75,055 MW Renewable Installed Capacity as

• f February ’19

Wind Power, 34,615 Small Hydro Power , 4,506 Biopower, 8,730 W to P, 138 Solar, 24,021

Renewable Installed Capacity

Thermal 222927.34 Nuclear 6780 Hydro 45399.2 RES 75194

Total Installed Capacity

New REC Projects: Registration Trend

208 64 108 276 246 1052 743 708 105 187 60 110 83 341 200 400 600 800 1000 1200 FY 11-12 FY 12-13 FY 13-14 FY 14-15 FY 15-16 FY 16-17 FY 17-18 FY 18-19 Non Solar Capacity Solar Capacity Data upto 31st Mar 2019

REC Projects registered since inception

5

Year Total Registered till 31.03.2018 Re-Validated(after end of Five years) Registration Revoked/Expired Registered as on 31.03.2018

• No. of

Projects Capacity

• No. of

Projects Capacity

• No. of

Projects Capacity

• No. of

Projects Capacity 2010-11 18 166 10 70 2011-12 346 2,087 177 1,018 2012-13 330 1,271 10 97 158 711 2013-14 239 811 13 70 220 669 2014-15 163 642 3 27 136 486 2015-16 86 311 8 67 35 334 80 263 2016-17 87 555 98 671 199 1,103 86 553 2017-18 38 179 184 752 142 443 38 179 Total 1,307 6,022 290 1,490 402 2,073 905 3,948 DISCOMS 2016-17 2 NA NA NA 2 NA

Schemes to promote RE

Accelerated Depreciation Scheme Generation Based Incentive Scheme Renewable Purchase

• bligation

Mid 1990s Focused on capacity addition 2009 Shifted focus from capacity addition to generation Electricity Act, 2003, National Tariff Policy, 2006 and National Action Plan on Climate Change, 2008 provided impetus to further RE growth

REC Genesis:

Separating green attribute from electricity

Un-bundled Green Power

Seller (RE power) REC(Green Attributes) Electricity REC(Green Attributes) Buyer (RPO Compliance) Electricity

Bundled Green Power

Seller (RE power) Buyer (RPO Compliance)

Issues

• Schedulability
• Uncertainty
• Transmission

Loss & Charge Solution

• No geographic

barriers

• Reduced

transaction cost

• Flexibility in

meeting the RPO Discoms, Power exchanges , Bilateral Contracts

9

Compliance Market: Overview of Legal Framework

2008 : National Action Plan on Climate Change (NAPCC)

• RPO at 5% in year 2010, increasing 1% every year for 10 years.
• Authorities may issue tradable certificates and penalties for shortfall

Jan’10 : CERC issued REC Regulation

• CERC designated National Load Despatch Centre (NLDC) as Central Agency: Notification dated 29.01.2010

June’10 : CERC approved Procedures for Accreditation, Registration & Issuance Sep’10: First amendment of REC Regulation July’13: Second amendment to REC Regulation

• Amendment in eligibility, Self consumption and Validity period

Dec’14 : Third Amendment to REC Regulations Mar’16 : Fourth Amendment to REC Regulations

• A distribution licensee shall be eligible for issuance of RECs
• Vintage Multiplier ,Validity of RECs for 1095 Days , Revision in price band of Solar RECs
• Terms and Conditions for recognition & issuance of Renewable Energy Certificate for Renewable Energy

Generation

REC Participants: Sellers/Eligible Entity

Identified Sources

REC Market Participants: Sellers/Eligible Entity

ELIGIBILITY CRITERIA

Self consumption

No promotional Banking/ Wheeling

ELIGIBLE

Sale through: Open Access/Bilateral

Sale at Mutually agreed price

ELIGIBLE

PPAs with distribution licensee

PPA at APPC

ELIGIBLE

PPA at state regulated tariff

NOT ELIGIBLE

REC Market Participants : Buyers

Obligated Entities

• Distribution Companies
• Open Access Consumers
• Industries consuming Captive Power

Voluntary Entities

• Corporates under CSR
• Individuals

Mechanisms to fulfill compliance

Feed in Tariff

Regulated tariff Purchase of electricity from RE Generator at Regulated tariff

Purchase of RE at market price

Buy from third party

REC (Renewable Energy Certificates) at PXs

Non Solar REC Solar REC

Penalty for non compliance in the provisions

• If an obligated entity fails to comply with the RPO, it shall also be

liable for penalty as may be decided by the commission under section 142 of Electricity Act, 2003:

• The Commission may direct the entity to deposit penal charges

equivalent to the forbearance price of REC multiplied by shortfall in units of RPO

Salient Features of REC Mechanism

Participation Voluntary

REC Denomination 1 REC = 1 MWh Validity 1095 Days after issuance* Categories 1. Solar REC 2. Non-Solar REC Trading Platform Power Exchanges only Banking/Borrowing Not Allowed Transfer Type Single transfer only , repeated trade of the same certificate is not possible Solar RECs Floor Price: Rs 1000/MWh Forbearance Price: Rs 2400/MWh Non Solar RECs(After 01.04.2017) Floor Price: Rs 1,000/MWh Forbearance Price: Rs 3,000/MWh Non Solar RECs(before 01.04.2017) Floor Price: Rs 1500/MWh Forbearance Price: Rs 3,300/MWh Penalty for Non-compliance ‘Forbearance’ Price (Maximum Price) Price Guarantee ‘Floor’ Price (Minimum Price)

As per CERC order dated 30 Mar’17

REC Mechanism

Procedure for ACCREDITION (Through State nodal Agency) Procedure for REGISTRATION (Through Central Agency NLDC) Procedure for ISSUANCE (Through Central Agency NLDC) Procedure for TRADING & REDEMPTION

(Through Power Exchanges )

Trading at IEX

Trading Day

Last Wednesday of every Month

Market Clearing

Closed Double sided auction

Trading Time

1300-1500 Hrs

By 1530 Hrs

Verification by Central agency for Valid REC by cleared seller at IEX

By 1600 Hrs

Central agency confirms REC

By 1630 Hrs

IEX finalizes trade

By 1700 Hrs

Buyer & Sellers informed to Central Agency

By 1800 Hrs

Invoice raised (proof of REC trade)

100 REC Buy @ Rs 3300 BUY SELL

A 100 REC @ Rs 3300 A 100 REC @ Rs 1500 B 600 REC @ Rs 2200 B 200 REC @ Rs 1700 C 200 REC @ Rs 1700 C 300 REC @ Rs 2000 3300 200 REC buy @ 1700

No of REC Price in Rs/REC

2200 600

600 REC buy @ Rs2200

200 REC sell @ Rs 1700 300 REC sell @ Rs 2000 100 REC Sell @ Rs 1500

Cleared volume : 600 RECs MCP: Rs 2200/REC

Accreditation Fee & Charges Application Processing Fee

• Rs. 5000

Accreditation Charges (One Time –

for 5 Years)

• Rs. 30,000

Annual Charges

• Rs. 10,000

Re-Validation Fees

(After 5 Years

• Rs. 15000

Registration Fee & Charges Application Processing Fee

• Rs. 1000

Registration Charges (One Time –

for 5 Years)

• Rs. 5000

Annual Charges

• Rs. 1000

Re-Validation Fees (After 5 Years

• Rs. 5000

State Nodal Agency Central Agency

Issuance Fee & Charges Fees Per REC issued

• Rs. 4.0

Central Agency

REC: Fee & Charges

Redemption Fee & Charges Fees Per REC traded

• Rs. 20

IEX

Fees & Charges: Impact

Assumptions:

• Project of Capacity = 1 MW
• Capacity Utilisation Factor = 22%
• No. of Units Generated = 1.927 MU
• No. of REC Issued = 1927

Cost Impact of Fee and charges in First Year

Cost Head

REC @ 1500 REC @ 2600 REC @ 3300 Accreditation 45,000 45,000 45,000 Registration 7,000 7,000 7,000 Issuance 7,708 7,708 7,708 TOTAL COST 59,708 59,708 59,708 Revenue from REC 28,90,800 50,10,720 63,59,760 % Cost Incurred 2.07% 1.19% 0.94% Paise Impact Per Unit (kWh) 3.09 3.09 3.09

Similarly the cost impact (in Paise / Unit) for: TWO Year THREE Year FOUR Year 2.03 Paise 1.68 Paise 1.5 Paise

Market Snapshot

REC: An Update

Source: REC Registry India

As of 15th April 2019

Accredited Capacity (MW) Registered Capacity (MW)

• No. of

Projects Registered No of RECs (in Cr) Issued Traded Self Retained Inventory Non -Solar 3910 3248 562 4.24 4.07 0.19 0.20 Solar 759 753 371 0.85 0.88 0.01 0.3

Total

4669 4001 933 5.41 4.96 0.20 0.24

Projects under REC Mechanism

RP : 3975 MW AP : 4336 MW

As on : 4th January,2014 Source: REC registry India

As on 12th Feb ,2014

As on As As on 2nd July 2014 As on 11th Aug’14 As on 4th Sept’14 As on 10th Dec’14 As on 9th jan’15 As on 12th Feb’15 Registration Capacity: 4,773 MW Accreditation Capacity : 4,989 MW Accredited Capacity : 5,056 MW Registered Capacity : 4,785 MW As on 18-04-19 Data as on 18th April,2019

1149 875 327 260 127 632 124 205 25 15 122 142 1153 963 745 266 127 637 176 200 25 30 159 189

State-wise RE Capacity (MW)

Tamil Nadu Maharashtra Uttar Pradesh Gujarat Karnataka Rajasthan Andhra Pradesh Madhya Pradesh Chhattisgarh Punjab Himanchal Pradesh Others

Registered Projects Accreditated Projects

Projects under REC Mechanism

As on 31st October’2013

Source: REC registry India

As on 12th Feb 2014

As on 6th March ,2014 As on 7th May 2014 As on 2nd July 2014 As on 11th Aug’14 As on 4th Sept’14 As on : 14-10-14 As on 7th Nov’14 As on 10th Dec’14 As on 12th Feb’15 Accredited Capacity : 5,112 MW Registered Capacity : 4,838 MW

As on 18-04-19

Data as on 18th April,2019

2210 429 423 179 743 2254 883 525 242 746 2

Source wise RE capacity (MW)

Wind Bio-fuel cogeneration

Biomass Small Hydro Solar Others

Accreditated Projects Registered Projects Accreditated Projects Registered Projects

Key statistics: REC Market at IEX

Market Share State Utilities Generators Industrial Consumers Cleared Volume

28 States I 5 UTs 660+ >3 Crore RECs

Highest: 32,39,142 RECs (Dec’17)

2930+

IEX Data as on 31st Mar , 2019

71%

• Less predictable
• Less controllable
• Require better prediction tools over one-day
• Scheduling changes till one-hour before

Schedulability

• More System imbalances
• Discoms to spend on more reserves to avoid UI
• More reserves required to balance

High Overheads

• Payment of Transmission, Wheeling Charges,

Losses and Scheduling Charges is higher than purchase of RECs

Open Access costly

Why REC a better option than

‘buying renewable power’ ?

RECs are better way to transfer green premium than green energy

REC trade details at IEX

136,979 323,993 221,674 191,988 291,588 244,401 295,010 355,657 295,601 547,166 675,592 716,929

• 200

400 600 800 1,000 1,200 1,400 1,600

• 100,000

200,000 300,000 400,000 500,000 600,000 700,000 800,000 Apr'18 May'18 June'18 July'18 Aug'18 Sep'18 Oct'18 Nov'18 Dec'18 Jan'19 Feb'19 Mar'19

No of RECS Cleared

Non-Solar

REC Traded MCP(Rs/REC) 644,151 393,822 288,070 808,324 216,223 1,359,045 130,279 32,556 88,272 97,277

• 500

1,000 1,500 2,000 2,500 Apr'18 May'18 June'18 July'18 Aug'18 Sep'18 Oct'18 Nov'18 Dec'18 Jan'19 Feb'19 Mar'19

• 200,000

400,000 600,000 800,000 1,000,000 1,200,000 1,400,000 1,600,000

No of RECs Cleared

Solar

REC Traded MCP(Rs/REC)

How to Start Two step Process

• Registration

– Become Member with IEX – Become Client through any of IEX members

• Start Trading

– Last Wednesday of every Month

Key Recent Developments & their likely impact REC Market

• Supreme Court Judgment on Renewable

Purchase Obligations Applicability in Rajasthan

• Gujarat High Court judgment in the case of

Hindalco (Birla Copper), and others

• Recent APTEL Judgments related to RPO / RECs

– Case 1: IWEA, IWTMA, VS All SERCS – Case 2: IWPA VS GERC & all Gujarat discoms

Company Snapshot 98% Market Share

6,400+ Participants 4000+ Industries 50+ Discoms 500+ Conventional Generators 1,650+ RE Participants

Competition Liquidity Transparency

30

Market Share-FY 18 (DAM+TAM) Average Daily Trade- FY18(DAM) Participation-as on 30 June’’18

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