Agneya\'s Newsletter on Renewable Energy Sector and REC market in India
agneya Volume 2 Issue 7HORIZONS 31 October, 2012Sustainable Development is Serious Business Energy chargesOver the past decade, organizations worldwide have faced uncertain market (Paise/ unit)conditions, declining natural resources, increasing cost of production and aggressive 800competition. This, coupled with rigorous regulatory and policy changes has added to 700the need for them to strengthen business foundations through sincere efforts at 600understanding and implementing business sustainability. As understanding of 500business impacts, risks and opportunities evolves over time, ways of doing business 400are undergoing significant change. Companies are trying to enhance business 300performance by addressing not only financial challenges, but also social, economic 200and environmental factors. 100 0 Oct-06 Apr-07 Oct-07 Apr-08 Oct-08 Apr-09 Oct-09 Apr-10 Oct-10 Apr-11 Oct-11 Apr-12Elements of BusinessSustainability Innovation Energy charges (Paise/ unit) Capital Efficiency Linear (Energy charges Risk Management (Paise/ unit)) Growth Enhancement Resource efficiency Job Creation Source: MERC Tariff orders for MSEDCL Green energy Skill Enhancement Product stewardship Local Economic Impact Improved technology Business Ethics Limitations in domestic coal supply, high costs of imported coal and high technical and Clean Water/Air Social Justice commercial losses in the network Emission Reduction Diversity contribute to increasing consumer Biodiversity Human Rights tariffs. For many industries, it is Environmental Research Community Outreach Recycling/Composting Labour Relations lack of power, not shortage that is pinching – high cost diesel generators are being used for Environment Justice running operations instead of Health and Safety Climate Change backup. Environment Regulations
2Companies that haveinvested in RenewableEnergy 20 MW, Wind, Captive consumption 8.7 MW, Wind; 0.4 MW Solar; Captive consumption Sustainable Growth – Focus on Renewable Energy 51 MW, Wind, Captive Environment is a key focus area for companies planning for sustainable growth. consumption Further, energy usage is one of their topmost concerns. 15 MW, Wind, Top 5 sustainability concerns for organizations Captive Energy Usage consumption. Recycling Water UsageShortage of coal is estimated to Employee well-being and benefitcontinue in the near future as programsenvironment clearance and land Community involvement/supportacquisition issues take time toresolve. 0 5 10 15 20 25 30 35 40 Source: Evolution of sustainability practices, AICPA, CICA, CIMAIndia’s coal inventory fell research studydrastically to 7.5 million tonnes – Renewable energy is not just a possible answer to climate change but more13% lower than the previous importantly, is a valuable source of energy and increasingly, an important part of themonth and lowest in many years economy. In the recent American Presidential campaign debate for example,even though there was a small President Obama reiterated support for production tax credit to wind energy as itrise in the coal production by CIL. encourages investment in clean energy and creates jobs. RE is not without itsThis shortage is a risk for downsides but it has many benefits to offer. Countries like India stand to gain a lot ifcompanies in terms of costs and they can contribute to all stages of the RE value chain – from R&D to manufacturing.shortage of energy. To mitigate Financingthis risk, many companies have Difficult Times – A Test of Commitmenteither invested in Renewable CommercialsEnergy or have contracted with a Commitment to sustainable development is tested under difficult economicthird party supplier so that they conditions. The Kyoto protocol was adopted in the 90s to reduce the impact of GHGcan fix part of their electricity cost emissions. Developed countries took up mandatory emission reduction targets underwith predictable increase in the this protocol. However, due to recent economic downturn, these countries arefuture. Technology beginning to doubt their ability to meet their targets for 2016.This approach also helps some The challenge is even greater for developing countries like India. The electricitycompanies to meet mandatory sector contributes more than 35% of the total GHG emissions in India. Increasingtargets set by SEBI on maturity of wind power, falling cost of solar power and introduction of programs likeEnvironmental, Social and RPO and REC market have presented companies with an opportunity to take a stepGovernance (ESG) disclosures. towards energy sustainability by shifting part / full consumption to renewable energy without taking a hit to the bottom line.
agneya 3REC Market in October 2012 REC Inventory Clearing REC Trade Buy Bids Sell Bids Volume Traded Price October 2012 REC Inventory Oct 2012 Rs. per RECRE Newsletter IEX 1,32,231 8,51,177 1,32,231 1,500 Non-Solar 2,22,700 PXIL 30,469 1,61,483 30,469 1,500 6,18,638 IEX 1,263 864 820 12,680 Solar PXIL 2,100 1,012 971 12,500 12,98,258 9,02,320RPO Compliance to drive market in short termWith supply of non-solar RECs outstripping demand by six times, the tradingsession closed at the floor price. With inventory reaching a new high, next trading Opening Issued Redeemed Balancesession could be a good opportunity for Obligated Entities to fulfill their obligationas prices may start rising from next year as the date for compliance for FY 2012-13 Source: REC Registrycomes closer and due to possible enforcement of RPO compliance backlog. Solar RECs Record Total IEX & PXIL Non-solar REC Trade Highest Traded Volume 300 274 3,500 264 236 3,000 The October trading session saw 250 223 206 1,791 Solar RECs traded – the 200 2,500 200 highest volume so far. This can 172 169 158 2,000 be attributed mainly to the 150 112 increase in buy bids and sell bids 106 1,500 96 at PXIL which for the first time 100 71 1,000 overtook those of IEX. The total 50 500 value of trade was recorded at Rs. 2.2 crores, also the highest - - so far. IEX and PXIL Whole Volume Trade in Thousands Price at IEX (RHS) Price at PXIL (RHS) Source: IEX & PXIL
600 Capacity Registered, MW 35004 3000State-wise Registered 500 2500Capacity, April 2012 to 400 384 335date 300 271 2000 250 1500State MW 200 172 158 167Tamil Nadu 149 1000 333 106 107Maharashtra 283 93 73 100 62 500Gujarat 140Karnataka 127Andhra Pradesh 71 0 0Madhya Pradesh 34Rajasthan 27Uttar Pradesh 20Uttarakhand 20Bihar 12 Cum. Registered till Date(RHS) RegisteredChhattisgarh 12 Source: REC RegistryPunjab 11Odisha 6Himachal Pradesh 4Total 1,100 In total, 167 MW of capacity was registered of which 42% was registered from Andhra Pradesh in October. With this addition, the capacity registered in this financial year has touched 1,100 MW.Source-wise RegisteredCapacity, April 2012 todateSource MWWind 810Bio-fuel cogen 139Biomass 127Solar PV 18Small Hydro 6Total 1,100agneyaAgneya is promoted by alumni of IIM Ahmedabad. We provide services in the following areas –Renewable Energy – advising clients on the best possible portfolio of renewable energy (wind, solar, bio) across tariff regimes,technology options, electricity sales structuring and availing incentives like REC and GBI.Renewable Energy Regulations – advising clients on regulatory aspects of electricity market, options for realizing the maximumvalue from their energy assets and minimizing costs related to regulatory compliance including addressing RPO.Carbon & Energy – measuring carbon footprint, current/future energy profiling, and setting up energy management systems toassess risks and opportunities related to energy security and climate change.Sustainability – building robust long term foundations for business i.e. managing economic, environmental and social aspects ofbusiness. These include establishing sustainability management framework and reporting as per GRI guidelines.For further information on Renewable Energy Certificates or other services, please contact us at –E-mail – email@example.com | Phone – +91-20-4120 3800, +91-88 06 07 07 83 | Website – www.agneya.in