As many as 2,36,485 non-solar renewable energy certificates (REC) and 342 solar RECs were traded on Wednesday on the two energy exchanges, Indian Energy Exchange and Power Exchange of India.

(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 have to purchase a certain quantum of either green power or RECs. Trading happens on the last Wednesday of each month.)

This month’s trade compares favourably with the 168,675 RECs traded in the May session. It is only the third month of the year and yet there is a good demand for RECs from the obligated entities. Although the total RECs offered for sale (3,60,691) was slightly higher than that offered for buy (3,49,448), the fact that the demand is almost as much as supply is seen as a heartening trend.

The prices were also good — Rs 2,402 an REC on IEXL and Rs 2,460 on PXIL for non-solar and Rs 12,780 and Rs 12,506 respectively for solar REC.

Surge in demand for solar RECs

A more significant point in the June trade was the surge in the demand for solar RECs. The demand was for 9,619 solar RECs which was almost six times as much as that of last month (1,642).

The significance of this lies in the fact that as the Government prepares itself to roll out the second phase of the National Solar Mission, RECs will play a critical role in the viability of the solar projects.

In the first phase, the Government had public sector energy trader NTPC Vidyut Vyapar Ltd bundle one unit of the costlier solar power with four units of unallocated conventional power and sell the five units at a weighted average price to the electricity distribution companies. As a result, while solar power developers got a higher price for the electricity they produced, the burden on the buyer of solar power was very marginal.

But the government may have run out of that option for the second phase, as there is little unallocated, market traded power to be mixed with solar power. The only way to ensure that solar developers get a remunerative price is the REC route.

There had always been lingering concerns about whether and how the solar REC market will take off.

Last month saw the first trades in solar REC. Indore-based M&B Switchgear had sold 10 solar RECs for Rs 13,000 apiece against the ceiling price of Rs 13,400. Therefore, the June trade of 342 solar RECs (336 on IEXL) is a good jump over last month.

“The overall market growth in both solar as well non-solar space seems good. However, with the first quarter of the financial year getting almost over, it would be highly desirable now to see state regulators and nodal agencies acting strictly on the RPO compliance,” says Mr Vishal Pandya, Director. REConnect, a consultancy that operates in the REC market, whose clients accounted for half of the volumes traded today.

(This article was published on June 28, 2012)
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