The marked pick-up in the demand for renewable energy certificates that was seen in the trading session for May, which was held on Wednesday, has been attributed to a recent judgment of the Supreme Court.

As many as 256,579 non-solar and 83,189 solar RECs were sold on the two country’s energy exchanges—IEXL and PXIL—roughly four times the volumes seen in April. These RECs were worth Rs 38.5 crore and Rs 29 crore, respectively. Comparatively, in May 2014, only 29,555 non- solar RECs and 2,120 solar RECs were sold.

(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 trade-able 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. Within the obligation, there is a small slice carved out for solar-RECs, or RECs from solar power generators.)

These numbers are unusual for the early months of the financial year—trading in RECs pick up in the last quarter, as the companies mandated to meet their renewable purchase obligations rush to comply before the year is out.

The high numbers have been generally attributed to last week’s judgment of the Supreme Court in a case filed by Hindustan Zinc. The judgment said that companies that had captive power plants were not exempted from the renewable purchase obligations.

Since the judgment clarifies a legal point, it affects many companies who now have to shell out money to buy either green power or, if they are not able to do so, buy RECs from the market instead. “The jump in trading appears to be a direct result of the Supreme Court judgement,” says Vishal Pandya, Director, REConnect Energy, a consultancy whose clients accounted for 35 per cent and 76 per cent respectively of non solar and solar RECs traded on Wednesday.

Ultratech Cements, Mangalam Cements, Binani Cements, Trinetra Cements, Shree Cement, Rajasthan Textile Mills Association, DCM Shriram Consolidated Ltd, JK Tyre Industries and Lucid Coloids Ltd had impleaded themselves in the petition filed by Hindustan Zinc—a petition that the judges said was “devoid of merit”.

“I expect the full impact of the judgment to be felt in the fourth quarter of the financial year,” says S Venkatachalam, Managing Director and CEO of Orient Green Power Ltd, one of India’s larger renewable energy companies.

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