The Perform Achieve and Trade (PAT) is a market based mechanism to reduce the specific energy consumption in energy intensive industries. This is facilitated through the trading of ESCerts which are issued to those plants who have over-achieved their targets. These plants are entitled to sell their ESCerts. The plants who were under achievers of their targets, are required to purchase ESCerts. The first cycle of PAT was completed in March 2015. Thereafter verification of the performance of DCs with regard to energy savings and based on recommendations made by BEE, the Ministry of Power issued approximately 38.24 lakhs.

1. ESCert Trading Analysis by Bicon Consultants
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Brief on ESCerts Trading
by
Bicon Consultants Pvt. Ltd.
Overview
The Perform Achieve and Trade (PAT) is a market based mechanism to reduce the specific energy
consumption in energy intensive industries. This is facilitated through the trading of ESCerts which
are issued to those plants who have over-achieved their targets. These plants are entitled to sell their
ESCerts. The plants who were under achievers of their targets, are required to purchase ESCerts.
The first cycle of PAT was completed in March 2015. Thereafter verification of the performance of
DCs with regard to energy savings and based on recommendations made by BEE, the Ministry of
Power issued approximately 38.24 lakhs. DCs have been entitled to purchase approximately 14.23
lakhs ESCerts. The DCs have contributed to the success of PAT cycle I and this cycle has witnessed
an energy saving of 8.67 Mtoe (Million Tonne of Oil Equivalent) against the targeted energy saving of
6.886 Mtoe which is about 30% more than the target. This energy saving is equivalent to 31 million
tonnes of CO2 emission reduction and monetary savings of INR 37,685 Crores which encouraged
investment of INR 2,45,00 Crores
ESCert Trade Statistics
A total volume of 38.24 lakhs were issued to the DCs and 14.23 lakhs ESCerts are expected to be
purchased. Since there is an option of banking of ESCerts, till the compliance period of next cycle,
some DCs may continue to hold the ESCerts and not trade them in this cycle. We have tried to predict
the market dynamics, through the analysis in the next section.
Figure 1. Share of ESCert Buyers vs. Sellers in PAT Cycle 1
Sellers
73%
Buyers
27%
ESCERTS % SHARE

2. ESCert Trading Analysis by Bicon Consultants
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ESCert Market Analysis
Even if some DCs continue to hold the ESCerts (some large DCs and their group companies are expected
to do this, as per our interaction with some of the DCs), the total number of ESCerts available for sale
will be much higher than the quantum required to be purchased to meet the compliance.
Hence, we could expect the trade to be inclined in favor of the buyers. As this cycle is expected to be
a buyer centric, the prices are expected to fall.
BEE has also notified targets, for 116 new DCs, taking total no. of DCs to 737. The performance of
these 116 new DCs in PAT Cycle 3 will further drive the prices of ESCerts in future. In comparison to
PAT - 2, the average energy reduction target for PAT Cycle -3 will see a steep jump by 11.42%. The
Iron & Steel and Power sector’s performance and profitability could be decisive factors in ESCert
trading.
Figure 2. Average Target Comparison of PAT Cycle 2 vs. PAT Cycle 3
Conclusion
The ESCert trading will see a good opening response. ESCert banking by DCs, based on their
anticipated energy performances will be a major driver for them to hold or sell their ESCerts.
4.20%
4.30%
4.40%
4.50%
4.60%
4.70%
4.80%
4.90%
5.00%
5.10%
5.20%
P A T C Y C L E - I I P A T C Y C L E - I I I
YOY AVG. ENERGY REDUCTION TARGET %
Average reduction %

3. ESCert Trading Analysis by Bicon Consultants
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Salient Features for ESCerts Trading
Compliance Mandatory
Target Entities Designated Consumers
Buyers Industries not achieving target
Sellers Industries achieving beyond target
Mechanism Cap and Trade
Phase Cycle 3 Years
ESCerts 1 ESCert = 1 MTOE (Metric Tonne of Oil Equivalent)
Trading Platform Power Exchange only
Price of Each Metric
tonne of oil equivalent
Rs 10,964/- as per notified figure
Penalty
As per Energy Conservation Act, 2001(Link with market
value of oil equivalent)
Banking Allowed for two consecutive cycles
Compliance Period 3 Years for DCs
Disclaimer: The analysis is based on certain assumptions. This reported is intended for prescribed users. Bicon will not be
liable for use of the analysis and decisions based on this analysis.