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Renewable Certificate Prices in India Volatile – reason being Renewable Purchase Obligations (RPO) Enforcement Uncertainty

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Renewable Energy Certificate

Renewable Energy Certificate prices in India are showing massive volatility with prices going down by almost 20% in one month as supply exceeded demand. Note the REC market in India is relatively young and is traded on just 2 exchanges. The frequency is just once a month as volumes remain low with limited participants. The market came into being after CERC mandated that by 2020, around 15% of the Indian electricity supply should come from green energy sources compared to around 5% now. To fulfill this requirement each state would have to set up a renewable energy target called RPO. Each state would have a different RPO determined by the state electricity regulator since different states had different green energy potential. The electricity producers could meet the shortfall in their green energy obligations by buying and selling of RECs.

However the market for REC remains volatile due to the fact there is a lot of uncertainty with RPO. The biggest source of this problem is the fact that RPO is not enforceable by the regulator. If the state slips in its RPO, it does not have to bear any penalty or punishment. Given the pathetic state of the electricity distributors in the state with billions of dollars in debt, it seems unlikely that they will buy expensive green energy to meet their RPO.

Indian Renewable Energy Certificate Market grows by an astounding 600% annually

India recently introduced the Renewable Energy Certificate Scheme to promote the use of Green Energy in India through a market based pricing mechanism. Other cleantech subsidies are being gradually reduced in favor of this single unified market process. In Wind Energy, the use of accelerated depreciation and GBI has been cancelled this year. REC Trading has seen an exponential increase almost every month since inception and it grew by almost 50% in June to see a record turnover of almost $10 million. Though small in absolute terms, the figure is set to grow as the pan India market sees many organizations entering to fulfill their Renewable Energy Obligations. India has set a target to obtain 15% of its electricity requirements from Renewable Energy from around 6% now. This will require about 4-5 GW of Green Energy installations every year.

Solar Renewable Energy Certificate (SREC) Prices to get support from New Jersey Legislators

Solar Renewable Energy Certificate (SREC) Prices in New Jersey have been falling at a sharp rate from a high of $600 to $225 as high returns from falling solar panel prices and other tax breaks. This has led to a massive growth in solar installations in the state making it the 2nd largest state by solar capacity. New Jersey installations have crossed 500 MW and made it a huge green job driver in the state. However this boom has made the market driven SREC prices fall quite sharply. Though not falling as sharply as Pennsylvania where SREC prices have become a joke, they are still low and falling.

New Jersey lawmakers are trying to rectify the situation with Assembly Telecommunications and Utilities Committee  approving two bills that seek to reverse a recent sharp fall in the value of the treadable Solar Renewable Energy Certificates. This will have the following measures like:

 1) Increase the PPA term to 15 years

2) Make non-utilities buy SRECs

to boost the falling SREC prices.

You can read:

“Renewable Energy Certificate” Policy Starts in India – What you need to Know and Who will Benefit

Business Line

 Only 1,58,320 non-solar renewable energy certificates were traded on the country’s two energy exchanges on July 25 compared with 2,36,485 in the trading session of last month.

The prices also sank — to Rs 2,000 a REC on the Indian Energy Exchange Ltd, and Rs 2,202 on the Power Exchange of India. Comparatively, the prices were Rs 2,402 and Rs 2,460 last month.

(RECs are generation-based ‘certificates’ awarded (electronically, in demat form) to those who generate electricity from renewable sources such as wind, biomass, hydro and solar, if they opt not to sell the electricity at a preferentially higher tariff. These certificates are tradeable on the exchanges and are bought by ‘obligated entities’, who are either specified consumers or electricity distribution companies. These obligated entities may either required to purchase a certain quantum of either green power or RECs. Trading happens on the last Wednesday of each month.)

Demand for RECs also fell steeply. Demand fell to 1,61,028 RECs against a supply of over 5 lakh RECS. Buy bids June were for 3,60,691, which means that the demand has fallen to less than half.

The Indian Energy Exchange accounted for 93 per cent of the traded volume today.

“With the market starting high during initial months of the financial year itself, we were actually expecting this. However, with prices declining in REC, we can expect new buyers emerging and, hence, prices getting stabilised after few months,” Mr Vishal Pandya, Director, REConnect, , a consultancy that operates in the REC market, told Business Line.

“The whole market is designed based on the assumption of Renewable Purchase Obligation enforcement and the current measures on the enforcement side seem not sufficient,” Mr Pandya said.

The only silver lining was the demand for solar RECs. Buy bids totalled to 8,754 solar RECs. However, due to non availability of solar RECs, only 179 were trade—at a price of Rs 12,800.

PG

Sneha Shah

I am Sneha, the Editor-in-chief for the Blog. We would be glad to receive suggestions, inputs & comments on GWI from you guys to keep it going! You can contact me for consultancy/trade inquires by writing an email to greensneha@yahoo.in or call me on +913340606492.

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