Trading in renewable energy paper at new high

| Updated on: Oct 27, 2011

This month's trading, as of today, in ‘renewable energy certificates' touched a new high, both in volumes and prices.

As many as 95,504 RECs were traded on the two exchanges – Indian Energy Exchange and Power Exchange of India Ltd – today, with the former accounting for 97 per cent of the trading.

On the price front, the average price was Rs 2,700 a REC on the IEX and Rs 3,000 on PXIL.

RECs are generation-based ‘certificates' awarded (electronically, in demat form) to those generating 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', which are either specified consumers or electricity distribution companies. These obligated entities may either be required to purchase a certain quantum of either green power or RECs.

Trading in RECs take place on the last Wednesday of each month, and if that day happens to be a holiday, then it takes place on the next working day.

Today, the cleared volumes were more than double of last month; in September, 46,363 RECs were traded, which in turn was twice as much as in the previous month. Last month's average price was Rs 2,300 for an REC.

Thus, trading in RECs has been picking up briskly both in volumes and in prices.

However, there are concerns. Although, the cleared volume has doubled, the overall demand, or ‘buy volume' was 2,35,401 units – only 4 per cent higher than in September.

“The very marginal increase in demand reflects lack of fresh demand being generated for RECs,” notes Mr Vishal Pandya of REConnect Energy Solutions, a consultancy that specialises in REC-related issues.

On the other hand, supply is becoming stronger. Supply of RECs, or ‘sell volume' grew 62 per cent to reach 1,35,625 units.

Thus, while the growth in cleared volumes and prices are encouraging, the flipside is the skew in the demand-supply scenario. Supply is growing way too fast compared with demand.

This brings into focus the important issue of what needs to be done to deepen the REC market. Primarily, experts are of the view that the various State electricity regulatory commissions should enforce obligation strictly.

Published on October 27, 2011

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