Discussion on linking on PAT and REC schemes in India

1. Project: Indian Carbon Markets
Linking PAT and REC schemes

2. PAT Scheme (2012)
• A regulatory instrument to reduce Specific Energy Consumption (SEC) in energy
intensive industries
• Market-based mechanism
• 1 ESCert (Energy Savings Certificate) = 1 TOE saved
• Flagship programme: Bureau of Energy Efficiency (BEE)
• Under the National Mission for Enhanced Energy Efficiency (NMEEE)
• Registry for ESCerts : Power System Operation Corporation Ltd. (POSOCO)
• Regulator : CERC

3. Source: iexindia.com
PAT Mechanism

4. MCP & MCV

5. PAT process
Source: iexindia.com
1
2
3

6. Cycles (I – V)
PAT Cycles I II III IV V
Aluminium Aluminium Aluminium Aluminium Aluminium
Cement Cement Cement Cement Cement
Iron & Steel Iron & Steel Iron & Steel Iron & Steel Iron & Steel
Paper & Pulp Paper & Pulp Paper & Pulp Paper & Pulp Paper & Pulp
Thermal Power Plant Thermal Power Plant Thermal Power Plant Thermal Power Plant Thermal Power Plant
Textile Textile Textile Textile Textile
Chlor-Alkali Chlor-Alkali Petrochemicals Petrochemicals
Fertilizer Fertilizer Buildings Buildings
Railways
Refineries
DISCOMs
INDUSTRY
Source: https://www.beeindia.gov.in/content/pat-read-more
PAT Cycles I II III IV V
Year 2012-15 2016-19 2017-20 2018-21 2019-22
Targeted energy savings (Mtoe) 6.6860 8.8690 1.0600 0.6998 0.5130
Achieved (Mtoe) 8.6700 - - - -
Emission reduction (MT CO2 equivalent) 31 31 - - -
Industrial units 478 - - - -
Sectors 8 11 6 8 8
Total energy consumption of DC (Mtoe) - - 35 - 15.244
ESCerts issued (lakhs) 38.25 - - - -
Designated Consumers (DCs) 309 621 116 106 110
Purchasers 110 - - - -
Purchased quantity of ESCerts (lakhs) 14.25 - - - -
Volume traded (lakhs) 12.98 - - - -
Amount of traded ESCerts (INR crores) 100 - - - -
Source: https://www.beeindia.gov.in/content/pat-read-more

7. Analysis of PAT Cycle - I
Day Sell Bid
(ESCerts)
Purchase
Bid
(ESCerts)
Trade
Volume
(ESCerts)
Price
Discovered
(Rs/ESCert)
No. of
Participants
Amount
traded
(in Rs.
Crores)
26.09.17 2,39,644 50,904 10,904 1200 39 1.31
03.10.17 2,36,031 51,925 23,295 1200 40 2.80
10.10.17 3,48,587 64,459 43,078 1000 52 4.31
17.10.17 3,81,443 40,538 40,148 800 45 3.21
24.10.17 3,49,806 42,271 41,455 600 52 2.49
31.10.17 3,83,379 21,037 19,359 500 51 0.97
07.11.17 4,36,394 11,521 10,351 350 61 0.36
14.11.17 3,19,810 12,241 12,125 200 45 0.24
21.11.17 3,36,121 10,963 7,513 200 53 0.15
28.11.17 3,68,361 1,17,514 36,580 250 64 0.91
05.12.17 3,55,226 2,62,331 46,928 350 73 1.64
12.12.17 4,33,769 4,95,553 1,23,520 525 85 6.48
19.12.17 8,31,224 7,30,885 4,49,818 1000 112 44.98
26.12.17 10,94,568 3,65,980 2,20,791 899 126 19.85
02.01.18 7,77,567 1,45,150 28,983 500 78 1.45
09.01.18 8,24,707 1,52,195 74,895 501 79 3.75
16.01.18 8,94,445 1,10,511 1,09,161 450 81 4.91
Total 12,98,904 100
Source: https://www.iexindia.com/marketdata/ESCerts_Market.aspx
ESCerts (in lakhs)
Total issued 38.25
Total purchased 14.25
Unsold 24.00
Avg. ESCert price in Cycle - I 619
Potential trading amount (in Cr.) 149₹
ESCerts can be banked for 2 consecutive cycles.
Targeted energy savings (Mtoe) 6.6860 8.8690 1.0600 0.6998 0.5130
Achieved (Mtoe) 8.6700 - - - -
Emission reduction (MT CO2 equivalent) 31 31 - - -
Industrial units 478 - - - -
Sectors 8 11 6 8 8
Total energy consumption of DC (Mtoe) - - 35 - 15.244
ESCerts issued (lakhs) 38.25 - - - -
Designated Consumers (DCs) 309 621 116 106 110
Purchasers 110 - - - -
Purchased quantity of ESCerts (lakhs) 14.25 - - - -
Volume traded (lakhs) 12.98 - - - -
Amount of traded ESCerts (INR crores) 100 - - - -
Source: https://www.beeindia.gov.in/content/pat-read-more

8. REC Scheme
• Renewable Energy Certificate (REC) – CERC – 2010 – ‘Green attribute’ of electricity
from renewable energy sources
• 1 REC = 1 MWh of energy generated from renewable sources
• Not subjected to the geographic and physical limitations of the underlying commodity
electricity
• There are two categories of RECs: Solar and Non-Solar
• Periodicity: Last Wednesday of the month
• Validity: 1095 days after issuance of REC (extended from time to time)

9. REC Framework
• Auction type : Closed, double sided
auction (anonymously)
• Participation : Voluntary
• Price formation : Uniform price auction
• Price caps : Floor & Ceiling prices
notified by the CERC
(from time to time)
Framework as per CERC Regulations Salient Features

10. Analysis of REC Market
Buyer Type DISCOM OA/CPP Voluntary
FY % % %
2010-11 35% 65% 0%
2011-12 76% 24% 0%
2012-13 79% 21% 1%
2013-14 76% 24% 0%
2014-15 78% 22% 0%
2015-16 41% 59% 0%
2016-17 53% 47% 0%
2017-18 60% 40% 0%
FY Solar Non-Solar
2010-11 0% 100%
2011-12 0% 100%
2012-13 1% 99%
2013-14 2% 98%
2014-15 5% 95%
2015-16 13% 87%
2016-17 9% 91%
2017-18 1% 99%
SN DISCOM RECs purchased
1 Maharashtra State Electricity DISCOM Ltd. 22%
2 Reliance Infrastructure Ltd. 9%
3 Brihan Mumbai Electric Supply & Transport Ltd. 8%
4 Tata Power Delhi Distribution Ltd. 8%
5 Torrent power Ltd. - Ahmedabad Distribution 7%
SN State RECs purchased
1 Maharashtra 28%
2 Gujarat 12%
3 Odisha 8%
4 Delhi 7%
5 Jharkhand 6%

11. Current Scenario of REC market

12. REC Mechanism
Impact
• Facilitates investment in the RE sector
• Facilitates RPO Compliance
• Inter-State renewable energy transactions
• Development of market for voluntary buyers
• Stakeholders involvement through
transparency
Challenges
• RPO Compliance - Enforcement of RPO by
SERCs
• Mismatch between Demand and Supply of
RECs
• Limited voluntary market
• Capacity building
• Reduction in the floor and forbearance price of
Solar and Non-solar REC

13. Way Forward
• Obligated entities prefer to purchase green energy over RECs, so that they can meet the
requirement
• Since launch of this mechanism, more than 400 projects have been revoked. Moreover, the
interest of RE generators in the mechanism have decreased in subsequent years due to
increasing inventory of RECs sellers and trading of RECs at the floor price
• Many stakeholders have suggested to relook the REC design framework with regard to REC
trading, vintage multiplier factor, long-term visibility of floor and forbearance price etc.

14. Linking Carbon Markets
Advantages
• Greater price efficiency
• Increase liquidity of carbon assets
• Linking markets at national level would make
it easy for international market under Paris
agreement
• High potential of achieving GHG reduction
Challenges
• Linking the processes of different markets
• Price at which interlink markets will trade or
convert the emission unit
• Benefits to the linked markets (any enhanced
emissions reductions)
• Need for registry or governance in terms of
certification and approvals for units in
interlinked markets

15. Similarities
1. Similar on the institutional
parameters
• Regulator : CERC
• Registry : POSOCO
2. Fair amount of implementation
experience
• Launching at around same time
• Huge participants
3. Common trading platform
• Trading Platform : IEX & PXIL
Differences
1. Timeframe
• PAT : 3 years
• REC : Annual (no definite cycles)
2. Coverage
• PAT : Broad
• REC : Narrow
3. Pricing mechanism
• PAT : Buy-sell dynamics
• REC : Price ceiling & Price floor

16. Approaches for linking REC and PAT
• 1st Approach
• Convert the common asset from both to common metric of price per ton of carbon
• MTOE  MWh using a determined conversion factor
• Then apply Grid Emission Factor (tCO2/MWh)
• 2nd Approach
• To involves conducting a disaggregated and granular level input fuel data analysis
• Emission factor for each fuel type taken to determine carbon emission reduction
• 3rd Approach
• Co-benefit approach
• Additional social, environmental, economic and development benefits

17. Thank you!!!