REConnect Energy Solutions

IssuesinimplementingSolarREC mechanism
Vibhav Nuwal
REConnectEnergySolutions

December2012

NonsolarRECmarkethascrashedduetolackof enforcement
NonSolarRECsDemandandSupply
1,400,000

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FY1011
1,200,000

FY1112

FY1213
1,230,061

1,000,000

1,012,660

No.ofNon Solar RECs

800,000 BuyBid 711,171 600,000 627,310 SellBid VolumeCleared

InNovember, only11%of availableRECs couldbesold. Theinventory currently standsatover 17lakhRECs

467,542 400,000

283,318 200,000 161,028 158,220 Mar'11 Apr'11 May'11 Jun'11 Jul'11 Aug'11 Sep'11 Oct'11 Nov'11 Dec'11 Jan'12 Feb'12 Mar'12 Apr'12 May'12 June'12 July'12 Aug'12 274,918

264,446 224,491 264,446 224,491 132,352 132,352

Sept'12

Oct'12

Nov'12

NonSolarRECsMarketClearingPrice
4,500

FY1011
4,000 3,500
Rs./Non Solar REC

FY1112

FY1213

Forbearance price

3,000 2,500 2,202 2,000 1,500 1,000 500 Mar'11 Apr'11 May'11 Jun'11 Jul'11 Aug'11 Sep'11 Oct'11 Nov'11 Dec'11 Jan'12 Feb'12 Mar'12 Apr'12 May'12 June'12 July'12 Aug'12 Sept'12 Oct'12 Nov'12 2,000 1,555 1,500 1,500 1,500 1,500 1,500 1,500 1,500

IEX

PXIL

Floorprice

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SolarRECsmarketisnascent
SolarRECs DemandandSupply
12000 10000 8000 6000 4000 2000 0 Jul'11 Aug'11 Sep'11 Oct'11 Nov'11 Dec'11 Jan'12 Feb'12 Mar'12 Apr'12 May'12 Jun'12 Jul'12 Aug'12 Sep'12 Oct'12 Nov'12
FY11 12 FY12 13

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NoSolarREC supplyinthemarket

TotalDemand TotalSupply TotalVolume cleared

Alittleover 5,000SRECs havebeen tradedtill date, comparedto over25LNon solarRECs

No. ofSolar RECs

SolarRECsMarketClearingPrice
13200 13000 12800
Rs./Solar REC

13000 12750 12506 12800 12800 12850 12850

12900 12680 12500 12500 MCPIEX 12100 MCPPXIL 12720

12600 12400 12200 12000 11800 11600 May'12

Jun'12

Jul'12

Aug'12

Sep'12

Oct'12

Nov'12

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SolarRECsmechanism keychallenges
ForRECmechanisminGeneral

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ForSolarRECsspecifically

Weakenforcementscenario

Noinstanceofpenaltiesimposed

Underdevelopedpoliciesin states

BankabilityofRECsprojects

Lackofabilitytoselllongterm Setbackinnonsolarmarketsdueto recentoversupplysituation

Moststatesdonothavesolar specificpolicies ThereisconflictbetweenCERCREC regulationsandstateRPO regulations/solarpoliciesinsome instances

Currentmodelfavours RECsfor existingprojects.Newprojects faceseveralhurdles

Rooftopandcolocatedoffgrid projectsareoutsidetheREC mechanism SolarRPOhavebeenrolled forwardinsomestates

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Statesmaydeny/holdupAPPCor openaccesspermissions StandardAPPCratesandcontracts arenotavailable

SolarRECsmechanism whatsworking

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SomemodelsareprofitablewithminimalRECcontribution

Eg solarcaptive+RECsislookingbankable

Recentstatesolarpoliciesareencouraging ThereisadedicatedpoolofcapitalforADrelatedinvestment Withmostotherincentivesgone,RECislikelytobetheonlyincentive mechanismforREgrowthinthefuture RecenttariffincreasesandRPOcostpassthroughareencouragingsignof possibleDiscomparticipation

However,themindsetofpayingforpaperneedstobeovercome

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DemandwillexceedsupplyforSolarRECsforthe foreseeablefuture

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UnlikeintheNonsolarRECsmarkets,inSolarthereisnolegacycapacityin themarket.Thiswillfavour earlysolarprojects

SolarRECs Demandand SupplyFY13 FY17
3,500,000 Demand 3,000,000 2,500,000 Supply

No. ofSolar RECs

2,000,000 1,500,000 1,000,000 500,000 FY13 FY14 FY15 FY16 FY17

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REexpansionplansareambitious,butincentivesare limited

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WithWindADgoneandGBInotyetrenewed,RECistheonlyremaining incentiveforREgrowth
The12th planisthe mostambitiousin termsofREgrowth RECistheonly remainingincentive mechanism

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ChangesneededforamoreeffectiveSolarRECmechanism

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Enforcement,enforcement,enforcement!!! Amodeltoincluderooftop/offgridSolarprojectsinRECsmechanism ForwardandOTCmarkets AvintagemultiplierbasedRECsmechanismforSolarprojects

AsrapidlyfallingPVpricesareadeterrent ThereisapprehensionofsignificantfallinRECspricesare2017

Quarterlycompliancerequirement

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REConnect CompanyHighlights
OneofIndiaslargestcompanyinRECandRPO services MembersofbothIEXandPXIL.Wetradedthe firstRECsinIndiainMarch2011andthefirst SolarRECsinMay2012

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Gujarat Flourochemicals

Solar Projects

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REConnectAdvantage
Ournewsletterisfocusedonresearch andanalysisoftheissuesandtrendsin theRECmarket.InJan,wewillpublish the28th issue IndiasfirstonlineRPOcalculator

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