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 of 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

0

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 0 0 0 0 10 70

2011-12 346 2,087 0 0 0 0 177 1,018

2012-13 330 1,271 0 0 10 97 158 711

2013-14 239 811 0 0 13 70 220 669

2014-15 163 642 0 0 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 0 NA 0 NA 2 NA

Schemes to promote RE

Accelerated Depreciation Scheme

Generation Based Incentive Scheme

Renewable Purchase obligation

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)

10

0 R

EC B

uy

@ R

s 3

30

0

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

Pri

ce in

Rs/

REC

2200

600

600 REC buy @ Rs2200

200 REC sell @ Rs 1700

300 REC sell @ Rs 2000

10

0 R

EC S

ell

@ R

s 1

50

0

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 0

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

REC

S C

lear

ed

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

REC

s C

lear

ed

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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