IEX - Trading of ESCerts on Power Exchange and Price Discovery Mechanism
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Transcript of IEX - Trading of ESCerts on Power Exchange and Price Discovery Mechanism
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Trading of ESCerts on IEX
Akhilesh Awasthy
Director (Market Operations)
Workshop by BEE on
ESCerts Trading and PATNet Portal
16th Dec 2015, IIC New Delhi
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Company Snapshot
96% Market Share ~80,000MWh average daily trade
3400+ Participants 3000+ Industries
50+ Discoms (all) 300+ Generators
Competition
LiquidityTransparency
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POWER EXCHANGE
Nation-widevoluntary access
E-trading
No counterpartyrisk
Robust Platform
Delivery Basedcontracts
Regulated by Central Electricity Regulatory Commission (CERC)
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6 3
0 6
216 25
672 38
79 1
398 22 33 16
11 0
0 21 48
7 15
4 1
0 1
761 2
59 57
3 3 1 2
7 23
273 4
Consumer: 3044
Generator: 304
Participation at IEX
402 8
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Industrial segments with IEX
Textile
29%
Manufacturer
15%
Metal
24%
Chemical
9%
Auto
Components6%
Cement
4%
Paper3%
Cotton1%
Others
9%
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Trading/Market Regulator (CERC)
Member
Client
Member
Trade
Trade
ESCertsRegistry
Clearing
Banks
Trading on Power Exchanges
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Why ESCerts Trading?
Plant 1 Plant 2 Plant 3
I n i t i a l
I n i t i a l
I n i t i a l
A c h i e v e d
A c h i e v e d
A c h i e v e d
= 10Initial
SEC
= 5Target
SEC3
5
7
Trade ESCerts on PX
Abatement
CostRs 10000/toe Rs 15000/toe Rs 20000/toe
No ESCerts Market
With ESCerts Market
Total Cost of Abatement =
(5*1000*10000)+(5*1000*15000)+(5*1000*20000)
= Rs 22,50,00,000
Total Cost of Abatement =
(7*1000*10000)+(5*1000*15000)+(3*1000*20000)
= Rs 20,50,00,000
Savings to
Economy =
(22,50,00,000-
20,50,00,000) =
Rs 2,00,00,000
Assume 1 SEC ≈ 1000 toe
Achieve EESavings with
less cost to
economy
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ESCerts MechanismStart 2012
Compliance Mandatory
Obligated Entities Energy intensive industries from 8 sectors, 478 in total
Target 6.6 Mtoe for1st cycle, allocated on SEC basis for each plant
Mechanism Market based Cap and Trade
Banking Allowed till next cycle
Denomination of ESCert 1 toe
Issuance Ex-post based on Energy Audit (80% issuance for intra-cycle,
every year)
Cycle span 3 yrs (2012-15 for 1st Cycle)
Market Place Multiple Power Exchanges, regulated by CERC
Trading Regulator CERC
Administrator & Scheme R’tor BEE
Central Registry POSOCO
Penalty As per Section-26(1A) of EC Act, 2001, to be decided by SDA
R l l f PX id
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Regulatory approval for PXs to provide
ESCerts trading platform
1) CERC to notify PAT Trading Regulations/Order
2) Power Exchanges to submit respective Business Rules (byincluding a Schedule for ESCerts) to CERC for approval, so as
to commence trading
Business Rules of IEX for ESCerts shall cover the following:• Price Discovery mechanism
• Contract specifications for ESCerts
• Risk Management mechanism
• Trading timelines
• Delivery, Surveillance and Clearing & Settlement
•
Member & Client categories
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Proposed ESCert Contract on IEX
Name of the Tradable Instrument: Energy Savings Certificate (ESCert)
Underlying Energy Savings Attributes of 1toe of energy savings byDesignated Consumer allowed in Energy Conservation (EnergyConsumption Norms and Standards for Designated Consumers, Form,
Time within which, and Manner of Preparation and Implementation of
Scheme, Procedure for Issue of Energy Savings Certificate and Value of
Per Metric Ton of Oil Equivalent of Energy Consumed) Rules, 2012
Instrument Types ESCert denominated by Cycle (e.g. ESCERT-C12-15)
Price Quotation INR/ESCert
Price tick 1 INR
Price Limits Not Applicable
Volume tick 1 ESCert
Minimum Order volume limit: 1 ESCert
Transaction Fee Specified by the exchange from time to time, upon approval
by the Commission
Matching Closed double-sided uniform price auction
Trading Cycle Once a month, Weekly trading from Jan’15 to Form -D
submission date (TBD)
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Proposed Price Discovery Mechanism
•
Closed Double-sided Uniform Price Auction
• Prerogative of respective Power Exchange to define its
own matching rules, and notify the same through
Business Rules
• IEX will utilise the matching engine used for REC
mechanism, all the matching principles to remain same
as that of REC
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Flow of ESCerts trading
ESCertsRegistry
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Trading Timelines
TIME on TRADE DAY DETAILS
Pre-trade Phase:
By 12.00 Hrs • Exchange to check Initial Margin of MembersOrder Accumulation phase (Bidding)
13.00 Hrs to 15.00 Hrs • Order Accumulation
Order matching and trade finalization
By 15.30 Hrs • Exchange to send details of maximum offer placed by Sellers to Depository
By 16.00 Hrs • Registry to send Exception report intimating any exceptions (excess Sell)
By 16.30 Hrs • Finalization of trade results after removing defaulters’ orders
• Exchange to inform participants about trade results
By 17.00 Hrs • Exchange to inform Registry, the details of successful buyers and sellers
Settlement Phase
By 17.00 Hrs on T Day • Files to be sent by Exchange to banks for actual debits(Pay-in)
By 11.00 Hrs on T+1 day
(next bank working day)
• Files to be sent by Exchange to banks for actual credits (Pay-out)
Delivery Phase
By 18.00 Hrs on T Day • Registry to debit ESCerts in Sellers’ Accounts and credit the same to Buyers’
Accounts
By 18:00 Hrs O T Day • Exchange to raise invoices to each participant as proof of transfer o
ESCerts.
• Reports shall be sent to all successful Members
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Proposed Risk Management Mechanism
• Risk management mechanisms shall be designed by respective PX
and shall be notified through Business Rules
• A Member or a Client, as applicable, is allowed to transact in a
contract only when he maintains the requisite Margin, including any
additional Margin, as specified by PX
• On IEX, Member will be allowed to place a purchase order in
ESCerts against cash amount made available (Margin Money),
equivalent to 100% of the order value. Sell orders are permitted
irrespective of margins
• Exchange has the right to impose penalty on defaulting Member,
who short-sell ESCerts in excess of available ESCerts in his
Registry account, as decided from time to time
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Surveillance, Delivery and C&S
• Surveillance: In order to ensure market integrity and to avoid
market abuses, the Exchange will use various on-line and off-linesurveillance tools like:
– Validation of orders
– Price & Volume movement monitoring
– Price rigging, concentration, price manipulation and other market abuses
The PX shall have the right to take appropriate actions in suchcases
• Delivery: Delivery of ESCerts shall be as per the Regulation/Order
issued by Commission and in pursuance to the BEE Rules, 2012.
•
Clearing & Settlement: Clearing House of PX will monitor andperform all activities relating to funds settlement, margining,
managing the settlement guarantee fund, and other relevant
matters
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Members & Clients of IEX
• All the existing Members and Clients of the Exchange are eligible to trade
ESCerts on the Exchange Platform of IEX. However, Exchange can also
notify a separate category of Member & Client who can participate only in
the ESCerts market segment. Different terms and conditions for Members
of the Exchange shall be defined in the Business Rules.
• Member trading in ESCerts shall be governed by Regulation 26 of CERC
(Power Market) Regulation-2010, The BEE Rules-2012 for ESCert trading,and the CERC Regulations (yet to be notified).
• Only Designated Consumers who are notified by BEE shall be permitted to
become Members/Clients of PX for ESCerts trading
• Fees and Charges levied by PX on Members & Clients for ESCerts trading
shall be as notified by respective PX from time to time
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REC Vs ESCerts Scheme
REC ESCert
Cycle 1 year 3 years
Life of Cert’ 365 days (second time extended to
1095 days)
Closure of second Cycle
(> 3 years)
Target State specific set by SERC, for Solar
and Non-Solar
Plant/DC specific, set by GoI
Unit 1MWh equivalent
Renewable Attribute
1 Toe
Energy ConservedBuyers Obligated Entities (Discoms, CPPs and
OA Consumers)
Designated Consumers
falling short of Target
Sellers Qualified Renewable Generators Designated Consumers
surpassing Target
Banking No Yes (1 Cycle)
Multiple Trading No (Once traded renders Extinguished) ---
Floor Price Yes (Solar: Rs 3,500 /MWh,
Non-Solar: Rs 1,500/MWh)
No
Forbearance Price Yes (Solar: Rs 5,800 /MWh,
Non-Solar: Rs 3,300/MWh)
No
Regulator CERC (Trading) & SERCs (Compliance) BEE(Scheme) & CERC(Trading)
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Trade Synopsis of RECs
-
1,000
2,000
3,000
4,000
0
200,000
400,000
600,000
800,000
M a r ' 1 1
S e p t ' 1 1
M a r ' 1 2
S e p t ' 1 2
M a r ' 1 3
S e p t ' 1 3
M a r ' 1 4
S e p t ' 1 4
M a r ' 1 5
S e p ' 1 5
a r k e t C l e a r i n g P r i c e
( I n R S / R E C )
N o .
o f R E C s T r a d e
d
Non-Solar REC Prices & Volume
IEX-Volume PXIL- Volume Price @ IEX Price @ PXIL
0
2,000
4,000
6,000
8,000
10,000
12,000
14,000
0
20000
40000
60000
80000
100000
M a y ' 1 2
N o
v ' 1 2
M a y ' 1 3
N o v ' 1 3
M a y ' 1 4
N o v ' 1 4
M a y ' 1 5
N o v ' 1 5
M a r k e t C l e a r i n g P r i c e
( R s
/ R E C )
N o .
o f R E C s t r a d e d
Solar REC Prices & VolumeVintage
Multiplier
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Over Supply of RECs
2015
1175
491 444
0 62307 197
0
500
1000
1500
2000
2500
FY 11-12 FY 12-13 FY 13-14 FY 14-15
C a p a c i t y R e g i s t e r e d ( M W )
REC Projects Slowing Down
Non Solar Capacity (MW)
Solar Capacity (MW)]
0
0.2
0.4
0.6
0.8
1
A p r
' 1 2
S e p t
' 1 2
F e b
' 1 3
J u l y
' 1 3
D e c
' 1 3
M a y
' 1 4
O c t
' 1 4
M a r
' 1 5
A u g
' 1 5 N
u m b e r o f R E C s ( C r o r e s )
Non-Solar RECs
Buy Bid
Sell bid
Traded
0
0.05
0.1
0.15
0.2
0.25
M a y
' 1 2
O c t
' 1 2
M a r
' 1 3
A u g
' 1 3
J a n
' 1 4
J u n e
' 1 4
N o v
' 1 4
A p r
' 1 5
S e p t
' 1 5
N u m b e r o f R E C s ( C
r o r e s ) Solar RECs
Sell Bid
Buy Bid
Traded
RECs(as on 15.12.2015)
RECs Issued 2.88 Cr
RECs Traded + Redeemed 1.15 Cr
Inventory 1.73 Cr (60%)
NAPCC proposes 10% of generation by 2015 from
Renewables, which amounts to 104.51 BUs
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Trade @ IEX
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Entities eligible for Membership:
Inter-State Generating Stations (ISGS)
Distribution Licensees
State Generating Stations
IPPs
CPPs and IPPs
(with consent from SLDC)
Open Access Customers
(with consent from SLDC)
Electricity Traders / Brokers (Including REC & ESCerts)
Designated Consumers (For ESCerts)
Who Can become Members of IEX ?
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IEX Membership Types
ProprietaryMember
Right to tradeand clear on its
own account
who can trade ESCerts onits own behalf and also itscompanies provided theownership remains the
same
ProfessionalMember
Trade and clearon behalf of its
Clients
NO CREDIT/FINANCING
ElectricityTraders
Trade and clearon behalf of its
Clients
CREDIT/FINANCING
ClientsEligible Designated Consumers
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Financial Requirements (For REC Membership)
Fees
Professional & Proprietary &
Electricity Trader
(Full Payment Option)
Proprietary member
(Light Payment
Option)
Admission fee Rs. 10,00,000 Rs. 5,00,000
Interest Free Security
Deposit
Rs. 5,00,000 Rs. 2,50,000
Annual Subscription
Fees
Rs. 2,00,000 Rs. 1,00,000
Processing Fees Rs. 10,000 Rs. 10,000
TOTAL Rs. 17,10,000 Rs. 8,60,000
Exchange Transaction Rs 20/REC Rs 30/REC
Cli t f E h (P d)
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Client of Exchange (Proposed)
Requirements to become a Client of a Member
Annual Client / Portfolio
Subscription Fees of IEX
Rs. 20,000
Member’s Fee Decided by respective Member, as guided by CERC
Power Market Regulations’2010
Exchange Transaction Fee Rs 20/REC (TBD for ESCert)
*All Designated Consumers registered with Central Registry areeligible to become a Client for ESCerts Trading.
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How to Move Ahead…
Become Member or Client (of a Member)…options
• Rs 8.6 Lacs +3p/kWh transaction fee
• Rs 17.1 lacs + 2p/kWh transaction fee
• Client @ 0.2 Lakh p.a
Technical Requirements• As specified by CERC/BEE for ESCerts
Connectivity with Exchange can be done in two ways
• Internet Immediate
• Leased Line
Start Trading
Thank You for your attention
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Best Power Exchange in India – Enertia Awards ’14, ’13 &’12 – India Power Award 2014 – Power Business View 2014
Inc India Innovative 100 Award for‘Innovation in Product and Technology’
Best Performing Power Exchange –
Power Line Awards ’13 & ‘12
India Power Awards ‘15 & ‘09
Thank You for your attentionwww.iexindia.com