Newsletter on REC by REConnect

Volume: XIV Month: October ‟11 Contents of this newsletter are for informational purposes only

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Vol. XIV

October

2011

www.reconnectenergy.com

Best Wishes From ,

Team REConnect

Dear Readers,

The main article this month is on the ‘Renewable Regulatory Fund’. This is a very important regulation by CERC, that will come in effect from January 1 ,2012. It will require all large third party wind and solar projects to forecast their generation on a day-ahead basis. This month saw the registration of the first Solar project in Maharashtra. With this, another milestone was achieved in the REC markets. However, the capacity required in the market to meet Solar RPO will be much larger, and as of now it doesn’t appear that even a fraction of that will be available in the REC markets or through PPA’s. It will be interesting to see how the regulators respond to this in March 2012. Trading resulted in another high in terms of volume and prices. Over 95,000 RECs were sold at a weighted average price of Rs 2,710 (price of both exchanges consid-ered). It was also a record month for REC issuances, which crossed the 120,000 mark. The increasing trend in volume is important because it is a signal of improv-ing liquidity in the market. For details on all these and more on the REC mechanism, read on.

-Team REConnect

REConnect Energy Solutions REC, Energy Efficiency, Electricity Portfolio Management

From Management’s Desk

http://www.reconnectenergy.com

Volume: XIV

Month: October „11 Contents of this newsletter are for informational purposes only


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Introduction to Renewable Regulatory Fund

Index RRF REC Trade Report REC Project Statistics Green News About REConnect

Background

The Renewable Regulatory Fund (RRF) is a new regulation that will come into effect from 1st Jan 2012. The importance of RRF is that it will require all wind and solar farms over a certain capacity, and not under a PPA, to schedule power one day in ad-vance. This will require forecasting generation from the Wind farm or solar project one day in advance and intimating it to the relevant agency. Over or under-supply from the forecast (a variance band is defined) will attract Unscheduled Interchange (UI) charges. The RRF is being put in place to better manage the grid as the installed capacity in wind and solar is growing rapidly. Both wind

and solar power are ‘infirm’ in nature, that is, difficult to predict and vary significantly on an hourly, daily and seasonal basis.

For example, 60-70% of the annual wind power is generated in the ‘high season’ – a period of 3-4 months that roughly corre-

sponds to the monsoon season. Similarly, solar power varies with seasons and time-of-day (nothing is generated in the nigh

for obvious reasons). This variability makes grid-management a challenging task, and hence the RRF is being put in place. A

day-ahead prediction of generation will make the task of managing the grid a bit easier.

Applicability of RRF The regulation will be applicable to Wind farms having capacity of 10 MW & above and Solar Generating Plants of 5MW & above connected at connection point of 33 KV level and above, and who have not signed any as on the date of coming into force (3.5.2010). Procedure for scheduling and account settlement The procedure is as follows: For wind farms

Responsibility for forecasting their generation up to an accuracy of 70%. Therefore, if the actual generation is beyond +/- 30% of the schedule, UI charges would be applicable to the wind generator. For actual generation within +/- 30% of the schedule, no UI would be payable/receivable by Generator.

UI charges within +/- 30% would be applicable to the host state. However, the implication of these UI charges shall be

shared among all the States/UTs of the country/DVC in the ratio of their peak demand met in the previous month based on the data published by CEA, in the form of a regulatory charge known as the Renewable Regulatory Charge operated through the Renewable Regulatory Fund (RRF).

Maximum generation of 150% of the schedule only, would be allowed in a time block from the grid security point of

view. For any generation above 150% of schedule, if grid security is not affected by the generation above 150%, the only charge payable to the wind energy generator would be the UI charge applicable corresponding to 50- 50.02 Hz.

In the case of Intra-State sale of wind energy, the transactions would be between the wind generator and the host

State at the contracted rate for actual generation. The implication due to deviations of actual generation within +/- 30% of the scheduled generation would be settled through the RRF. The implication due to deviations outside +/- 30% would be settled directly between the host State and the Wind Farm in accordance with the energy accounts issued by the RPC.


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Index RRF REC-Trade Report REC Project Statistics Green News About REConnect

For Solar Generators

The schedule of generation shall be given by the generator based on availability of the generator, weather forecasting, solar insolation, season and normal solar generation curve and shall be inspected by the RLDC in which the generator is located and incorporated in the inter-state schedule. If RLDC is of the opinion that the schedule is not realistic, it may ask the solar generator to modify the schedule.

No UI shall be payable/receivable by Generator.

In the case of intra-State sale, the host State would pay the generator at the contracted rate for actual generation.

In the case of inter-State sale, the purchasing State would pay the generator at the contracted rate for actual genera-

tion. The implication of UI charges due to the deviation for purchasing State and host State would be settled through

the RRF.

Tab 1: RRF procedure criteria for Wind & Solar.

Which agencies are involved and what will be their role? SLDCs, RLDCs, NLDC and RPC are involved in the whole procedure. Their roles are as follows:-

State Load Despatch Centre (SLDCs) Scheduling on daily basis with periodic revisions.

Schedule and ‘actual generation meter data’ to be sent to RLDCs and RPCs.

Payments/receipts to concerned Generators and settlement of accounts with RRF.


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Regional Load Despatch Centre (RLDCs)

Processed data of energy meters along with final schedule to be sent to RPCs on weekly basis.

Inspection of solar generation schedule & Monitoring and performing checks.

Direct co-ordination with Regional entities for contracts & energy meter data.

Regional Power Committee (RPCs) Issuance of Statement of Energy Accounting on Weekly basis.

Data handling of contracts and contracted price for issuance of energy and deviation accounts.

To work out details towards Capping, Additional UI charges etc. if any.

National Load Despatch Centre (NLDCs)

To maintain and operate RRF.

Settlement of payments from RRF to Various Wind/Solar power plants/ State utilities.

Issuance of statement & collection of Renewable Regulatory Charge.

Implications for Project Owners

If RRF is applicable, the project will have to forecast and schedule its power

This will require: Installation of special energy meters (which can provide data in 15 minute time-blocks) Developing a method/ tool for forecasting Scheduling of power Continuous monitoring (a maximum of 8 revisions for each 3 hour time slot will be allowed)


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Schedule Generation: 100 MW

Table 2: Intra-State RRF Accounting in case of Wind Generators.

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Volume: XIV



The highlight of this trading session was the increase in volumes (95,504 RECs sold versus 46,362 last month) and price (Rs 2710/ REC*). The increase in cleared volume of 106% is significant, particularly as increase in volume offered for sale increased only by 62%. This is a clear indication that sellers are expecting a higher price in the future, and are willing to hold RECs for that. Since the price jump was significant this month (~18%, on the back of a 29% jump last month), a lot of the RECs which were held back to be sold only at higher prices were cleared this month.

The price increase was also noteworthy. IEX price was Rs 2,700/ REC while PXIL was Rs 3,000/REC. If we consider the last few months, prices have risen from the floor price to the current level – an increase of 80%. This is despite that fact the demand volume grew very slowly (only 4% this month, vs 24% in September and 90% in August). This may be due to lower participation during the Diwali holiday season, and also dampening of demand due to the high pric-es of last month. No Solar RECs were traded this month.

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Review of REC Trading-October 2011


* Weighted Average of the prices at IEX and PXIL


Volume: XIV Month: October „11 Contents of this newsletter are for informational purposes only


Status of REC Mechanism as on October 28 ,2011


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Vol. XIII

Accredited Capacity = 1686.938 MW





Status of REC Mechanism as on October 27, 2011


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Registered Capacity : 1241.17 MW





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Energy Banking Provision is being withdrawn in Maharashtra In a recent circular released by Maharashtra State Electricity Distribution Co. Ltd ( MSEDCL) which proposed new rules for

banking of power generated by renewable sources and sold under open access. For more details:

http://reconnectenergy.com/blog/2011/10/maharashtra-not-to-allow-banking-of-power-to-renewable-generators/

Power Exchanges Raise REC Trading Charges

IEX and PXIL have raised trading charges across most categories of power trading products. However, REC trading charges

have only been revised by IEX. REC trading charges at IEX are now Rs 20/REC (up from Rs 10/REC). At PXIL, charges re-main at Rs 10/REC.

http://www.iexindia.com/IEXPower/Uploads/ExchangeCircular/2011/October/Circular%2076.pdf http://www.powerexindia.com/PXIL/download.aspx?did=4&type=circulars&id=74 First Solar Project Gets Accreditated The first solar project got accredited under the REC Mechanism. The project is of Jain Irrigation, has a capacity of 8.5 MW and

is located in Maharashtra.

https://www.recregistryindia.in/index.php/general/publics/accredited_regens

Renewable Energy Certificates needs market push

With an extra one-and-a-half paise added into accounts of people who put up renewable energy capacities such as windmills, biomass and solar plants is an attractive return, justifying their investments. The current scenario of the Renewable Energy

Certificates market of the country and its upcoming challenges has lots of concerns.

http://www.thehindubusinessline.com/opinion/article2549198.ece


Cumulative Capacity of Issuance Capacity( MW) * Based on REConnect’s analysis and assumptions regarding PLF of registered ca-pacity.

Green News

Accredited=1686.938

Registered=1241.17

Issuance *=168.09

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Upto March April May June July Aug Sept Oct

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http://reconnectenergy.com/blog/2011/10/power-exchanges-raise-rec-trading-charges/

http://www.iexindia.com/

http://www.powerexindia.com/pxil/

http://reconnectenergy.com/blog/2011/10/first-solar-project-gets-accreditated/

https://www.recregistryindia.in/index.php/general/publics/accredited_regens

http://www.jains.com/

http://reconnectenergy.com/blog/2011/10/green-energy-needs-market-push/

Volume: XIV Month: October „11 Content of this newsletter is for informational purposes only


Consolidated Status of RPOs across various states in India - As on September 28, 2011


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State

Status of Regulation

2011–12 RPO Obligation*

RPO on CPP?

RPO on OA Users?

Penalty ?

Andhra Pradesh -

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-

-

-

Assam Final

2.70 % + 0.10%

Yes

Yes

Yes (RECmax)

Bihar

Final

2 % + 0.50%

Yes

Yes

Yes (RECmax)

Chhattisgarh

Final

5.25 % + 0.25%

Yes

Yes

Yes (RECmax)

Delhi Draft

1.90 %+ 0.10 %

Yes

Yes

Yes (RECmax)

Gujarat

Final

5.50 % + 0.50%

Yet to be notified

Yes

Yes (RECmax)

Haryana

Final

1.25% + 0.25%

Yes

Yes

Yes (RECmax)

Himachal Pradesh

Final

11% + 0.10 %

Yes

Yes

Yes (RECmax)

J&K

Final

2.9 %+0.10 %

Yes

Yes

Yes (RECmax)

Jharkhand

Final

2.5 % + 0.50 %

Yes (>5MW)

Yes

Yes (RECmax)

Karnataka

Final

10 % + 0.25% (BESCOM,MESCOM,CHESCO

M), 7 % + 0.25% for others

Yes (>5MW)

5% RPO

Yes (>5MW)

5% RPO

Yes (RECmax)

Kerala

Final

3.05 %+0.25 %

Yes

Yes

Yes (RECmax)

Madhya Pradesh

Final

2.10 % + 0.40%

Yes

Yes

Yes (RECmax)

Maharashtra

Final

6.75% + 0.25%

Yes

Yes

Yes (RECmax)

Meghalaya

Final

0.45 % + 0.30 %

Yes

Yes

Yes (RECmax)

Orissa

Final

4.90 % + 0.10 %

Yes(>5MW)

Yes

Yes (RECmax)

Punjab

Final

2.34 %+0.03 %

Yes

Yes

Yes (RECmax)

Rajasthan

Final

9.50 % + JNNSM

Yes

Yes

Yes (RECmax)

Tamil Nadu*

Final

9.95 + 0.05 %

Yes

Yes

Yes (RECmax)

Tripura

Final

0.90 % + 0.10 %

Yes (>5MW)

Yes

Yes (RECmax)

Uttrakhand

Final

4.5% + 0.025% Yes

Yes

Yes (RECmax)

Uttar Pradesh

Final

4.50 %+ 0.50 %

Yes

Yes

Yes (RECmax)

West Bengal

Final

-

NA

NA

REC not recognized

JERC for Goa and UTs

Final

1.70 % + 0.30 % Yes

Yes

Yes (RECmax)

JERC for Manipur and Mizoram

Final

2.75 % + 0.25% (Man) 5.75% + 0.25% (Miz)

Yes

Yes

Yes (RECmax)

Nagaland

Draft

15.75 % + 0.25%

Yes

Yes

Yes (RECmax)




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Dear Readers,

Our previous newsletters are available at our website www.reconnectenergy.com and can be downloaded from :

http://www.reconnectenergy.com/rec/index.php/newsletters-on-rec-mechanism.html

The summary of our previous newsletters we have published is available below.

Volume IV: November 2010 Launch of REC Market, CDM Vs. REC Mechanism - An Analysis (Analysis of this has been also reported by Bloomberg)

Volume V: December 2010 & January 2011

Impact Analysis of RPO

Volume VI: February 2011

Demand and Supply Analysis of REC Mechanism

Volume VII: March 2011

India Witnesses First Ever Trade of REC

Volume VIII: April 2011

Solar RECs: Investor‟s perspective and feasibility study

Volume IX: May 2011

REC Market: Another round of Regulatory Push Required

Volume X: June 2011 Analysis on proposed Floor & Forbearance Prices for control period 2012-2015

Volume XI: July 2011

Applicability of REC/RPO on Co-Generation Power Plants

Volume XII: August 2011

REC & RPO: The Dilemma of Double Accounting of “Green Tags”

Volume XIII: September 2011 Metering Issues in CPPs and Co-Gen: From REC Perspective

Past Newsletters

Feedback:

We wholeheartedly thank you for providing your valuable feed-back on our last newsletter. Your feedback on the

newsletter keeps us motivated and would certainly help us to improve the quality of it. Kindly keep writing to us.

We are eager hear your views.

Best Regards, Team - REConnect




Services Provided by REConnect


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Vol. XIV

Detailed Services in REC Space

Services for RE Generators

Services for Obligated Entities (Distribution Companies / Open Access Consumers / Captive Consumers)

Index RRF REC Trade Report REC Project Statistics The Green News About REConnect




REConnect is a venture focused on the Renewable Energy Certificates,

Energy Efficiency and Electricity Portfolio Management.

REConnect’s team has extensive experience in the environmental markets

both in India and internationally:

Worked in the international carbon markets for several years and has

expertise in the consulting and trading of emissions reductions

Extensive knowledge about various Renewable Energy Certificate and

Energy Efficiency Certificate markets in USA, Europe and Australia etc.

Worked with Indian Energy Exchange (IEX), India’s leading power ex-

change, and have extensive knowledge and experience of power mar-

kets

Alumnus of Columbia University, an Ivy League University in USA, and

IIT Bombay

Highly experienced core team worked with organizations like

J P Morgan, Indian Energy Exchange, Asia Carbon and Gensol.

Contact REConnect

New Delhi Vibhav Nuwal [email protected] +91 88006 79988

Bangalore

Vishal Pandya [email protected] +91 96202 21101 Mumbai Ramkumar K [email protected] +91 99303 59992

About REConnect

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Index RRF REC Trade Report REC Project Statistics The Green News About REConnect


Newsletter on REC by REConnect

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