RE Chronicles - From the Editor's desk - EfficientCarbon

Energy Industry by launching the trading of much awaited Renewable Energy Certificates. Since then, close to Rs.431Crores worth of trading has taken place in ...
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RE Chronicles - From the Editor’s desk Renewable Energy is touted as the energy of the future. It is a vast and constantly growing engineering discipline that witnesses major breakthroughs everyday at some part of the world. In addition to this, there are several application-oriented innovations springing up from the most power starved places in the world such as Africa – be it Solar Chargers, Solar Lighting Systems, Solar Water Purification Systems and so on and so forth. At home, in India, we are witnessing similar disruptive models that are aimed at electrifying complete villages or providing water pumping solutions for villages. On a national level, initiatives such as Jawaharlal Nehru National Solar Mission (JNNSM) and Renewable Purchase Obligation (RPO) mechanism aim at driving Renewable Energy to the forefront of the Indian Power sector and secure India’s energy needs in the foreseeable future. In March 2011, Central Electricity Regulatory Commission gave a major push to Indian Renewable Energy Industry by launching the trading of much awaited Renewable Energy Certificates. Since then, close to Rs.431Crores worth of trading has taken place in the last 17 months of trading at the 2 energy exchanges of India – Indian Energy Exchange (IEX) and Power Exchange India Limited (PXIL). The REC market which is driven by the RPO obligations stipulated by the respective State Electricity Regulatory Commissions (SERCs) of each state is still nascent. This year, which is the beginning of the second control period 2012-17 for RPOs, has already seen major trading activity to the tune of Rs.145 crores in the first 4 months compared to Rs.286 crores of trading during entire last year. In such a huge market where there are several external factors which effect the trading, there is a need for an organization which constantly and closely monitors the market so as to bring the latest improvements in the quickest time with the backing of impeccable analysis. We at EfficientCarbon strive to do just that to advice the several players in the market. At EfficientCarbon, we are also constantly updating ourselves on the technology as well as the business-model innovations that are being developed in India and across the world in the field of Renewable Energy. Starting this month, EfficientCarbon shall publish a monthly newsletter – “RE Chronicles” – which shall bring you the latest updates in the field of Renewable Energy and the Indian REC Market. We are starting this first edition of RE Chronicles with an update on the REC market since its inception. In addition to this, the article on REC Market Potential gives you an estimate on RPO Obligation in Energy terms and the REC trading estimates for the year 2012-13. This is based on a carefully done analysis based on existing information and has never been attempted before. “RE Chronicles” would serve as a one-stop-shop for those looking for the latest in Renewable Energy and REC Markets. We promise to provide the best and most accurate information to our readers. Kindly give your valuable feedback on how we can improve our newsletter in order to make “RE Chronicles” an even more delightful and interesting read for you. Happy reading!!

REC Activity – Status Quo Accredited /Registered Projects: RE Source-wise Contribution: Projects accredited and registered under REC mechanism till date show almost similar pattern with wind source occupying more than half of total capacity of projects. Biomass & Bio-fuel cogeneration too have considerable share which is quite expected for a country like India which is among the highest sugarcane and grain producing countries in the world. Small hydro and solar PV have the lowest share. This shows considerable confidence of investors in wind, biomass and bio-fuel cogeneration projects under REC. The following graphs give a graphical representation of the Accredited/Registered until now. % share based on Type of RE Source (As on 26-Jul-2012) Bio-fuel cogener ation 21%

Accredited RE projects

Biomass 17%

Wind 56%

Others 0% Small Solar PV Hydro 1% 5%

2000

Bio-fuel cogenera tion 21%

Urban or Municip al Waste 0%

Registered RE projects

Wind 55%

Biomass 18% Others Small 0% Hydro 5%

Solar PV 1%

1826 1595

Capacity Accredited (in MW) Capacity Registered (in MW)

1500 1000

535 500 0 0

19

18

166 152

0 0

520

672

629 16 0

2

0

Capacity in MW based on Type of RE Source (As on 26-Jul-2012)

2

State-wise contribution: Tamil Nadu, Maharashtra and Uttar Pradesh account for the majority of REC projects each having more than 20% share in total capacity accredited and registered. Gujarat, at fourth place, is way behind them with just 11% share of registered capacity. Some activity is just being observed in Chhattisgarh and Karnataka. Rest of the states have negligible contribution to RE capacity building under REC. Haryana stands in the last position after Bihar and Delhi with 11.5 MW accredited under Biomass. Orissa is yet to enter the market. State-wise % share (As on 26-Jul-2012) Delhi 0% Punjab 1% Bihar 0% Haryana 0%

Accredited RE projects

Chhattisgarh 4%

Gujarat 13% Uttar Pradesh 21%

Uttarakhand 1% Kerala 1% J& K, 17.5, 1% Himachal Pradesh 1%

Karnataka 4% Madhya Pradesh 1% Maharashtra 23%

Tamil Nadu 25% Rajasthan 3%

Punjab 2%

Registered RE projects

Haryana 0% Chhattisgarh 4% Uttarakhand 1% Kerala 1% Himachal J&K Pradesh 1% 2%

Uttar Pradesh 23%

Gujarat 11% Karnataka 2% Madhya Pradesh 1% Maharashtra 23%

Tamil Nadu 27%

Rajasthan 2%

REC Inventory: Since the inception of REC trading in March 2011, close to 2.05 Million RECs have been issued and 1.65 Million RECs have been redeemed which is an 80% trading rate. As expected, RPO obligation far outstrips the supply of RECs as projects are still being setup. It will be a while before supply meets demand in the event of fully-enforced RPO obligation. Hence, ideally, REC market would reflect effective RPO enforcement when: 1. Supply of RECs would fall short of demand of RECs for RPO obligation 2. RECs redeemed are more than or equal to RECs issued for a month. However, we see fluctuation in number of RECs redeemed vis-à-vis REC issued month over month. Overall, favourable trading sessions for REC market have been Dec-2011, Jan-2012, Feb-2012, Mar2012 and June 2012 where RECs redeemed are greater than or approx. equal to REC issued which shows that towards closing of fiscal year 2011, much more trading activity is observed. The following table highlights the inventory details for the current financial year 2012-13. REC Inventory for Apr-2012 to Jul-2012 (as on 26-Jul-2012) Month, Year

Opening Balance

REC Issued

REC Redeemed

Closing Balance

April, 2012

38545

122369

71226

89688

May, 2012

89688

230697

168685

151700

June, 2012

151700

259125

236827

173998

July, 2012

173998

382712

158399

398311

[REC market potential and RPO obligation in energy terms are discussed in more detail in our next article “REC Market Potential” which is all the more exciting as it involves estimates and projections based on existing data.]

Non-Solar: As on 26-July 2012, 1999830 non-solar RECs have been issued by NLDC out of which 82.5% i.e. 1650304 RECs have been redeemed with the current closing balance/ inventory of 349526 RECs. The trend for RECs issued and redeemed show continuously increasing numbers on monthly basis which predicts an overall growing REC market.

Non-Solar RECs Inventory (as on 26-Jul-2012) 400000 Opening Balance

350000 300000

REC Issued

250000 200000

REC Redeemed

150000 100000

Closing Balance July, 2012

June, 2012

May, 2012

April, 2012

March, 2012

February, 2012

January, 2012

December,…

November,…

October, 2011

August, 2011

July, 2011

June, 2011

May, 2011

April, 2011

March, 2011

0

September,…

50000

Solar: Issuance of Solar RECs started from May, 2012 only. While 249 RECs were issued for the first time, only 10 RECs were redeemed. In June however, 324 Solar RECs were redeemed in comparison to 324 solar RECs issued in June. In the latest trading session that happened in July 328 RECs were issued though only 179 RECs were redeemed resulting in closing balance of 370. Solar RECs Inventory (as on 26-Jul-2012) 400 350 300 250

Opening Balance

200

REC Issued

150

REC Redeemed

100

Closing Balance

50 July, 2012

June, 2012

May, 2012

0

REC trading: Since the beginning of REC market, buy bids for non-solar RECs have always been higher than sell bids except for April’11, May’11 and June’12) where sell bids outnumbered buy bids. A total of 1650304 non-Solar RECs have been traded thus far resulting in Rs.4.31 billion worth transactions. The average clearing price for Non-Solar REC for the 17 sessions combined on IEX and PXIL is Rs.2611. Solar RECs have begun trading only in May 2012 and 531 RECs have been traded in the 3 months resulting in transactions worth Rs.67.8 Lakhs. Following is a detailed analysis of Solar and Non-Solar REC trading on each exchange. Indian Energy Exchange (IEX) IEX: Non-solar RECs trading Average number of RECs traded over 17 trading sessions till date is 90417 with an average price of Rs.2620 per REC resulting in trade of approx. 335 million INR in each session. Till date 1537093 NonSolar RECs have been traded resulting on monetary transaction of approx. 4.03 billion INR.

x 10000

IEX trading for Non-solar RECs (as on 26-Jul-2012) 50

3,900

3,900

3,700

45

3,500

40

3,300 35 2,900

30

3,051 3,066

3,100

2,900

2,900

2,700

25

2,700 2,402 2,402

20 2,300

15

2,500 2,300

2,201 2,000

10 5

2,950

2,100

1,800

1,900

1,500 1,500 1,505 1,555

1,700

0

1,500

Buy Bids (REC)

Sell Bids (REC)

Cleared Volume (REC)

Clearing Price

Session of July 2012 witnessed quite a few unprecedented events and was disappointing to REC sellers. Sell bids (supply) were highest ever in this trading session due to highest opening balance and highest RECs issued in July as compared to previous sessions. Buy bids were depressingly low as compared to those in last 10 trading sessions raising a question mark on enforcement though it may

not be appropriate to make a judgment from a single trading session. Very high number of sell bids in comparison to the already low buy bids plunged clearing price to Rs. 2000 which is Rs. 620 below average clearing price observed till date. IEX: Forecast for Non-solar RECs trading Highest every closing balance for non-solar REC inventory this July and continuously increasing issuance of RECs indicates that an even higher number of selling bids can be expected in the coming trading session. The clearing price is also expected to be around or even lesser than this month’s value unless the number of buy bids pick up drastically. IEX: Solar RECs trading Demand for Solar RECs has always outnumbered supply disproportionately due to limited number of solar projects under RECs. There has been an average demand of 3307 over 18 trading sessions. However, trading only started in May 2012 and 434 Solar RECs have been traded till date. Average supply of solar RECs over three trading sessions has been 369 with respect to the average demand of 6560 which is approx. 17 times the supply. Clearing Price over last 3 trading sessions was much close to the forbearance price of Rs.13400 thus giving significant returns to sellers. In last trading session, only 93 solar RECs were sold in comparison to buy bids of 8554 and sell bids of as high as 419 which indicates even higher price expectations from sellers and lower price expectation from the buyers. IEX trading for Solar RECs (as on 26-Jul-2012) 600

13,000

500

13,300

541

12,800

12,750 419

12,300

400

11,800

336

300

11,300 10,800

200 100 0

12,800

10,300

149 93 5 May-12 Clearing Volume

9,800 9,300

Jun-12 Selling Bids

Jul-12 Clearing Price

IEX: Forecast for Solar REC trading For the next few months, the current pattern is going to be repeated i.e. demand overshooting supply due to very less capacity of Solar PV projects registered i.e. 18.16 MW (*approx.2270 RECs generated per year when commissioned). Amid such huge gap b/w supply and demand gap, the current trend of very high clearing price will be continued over coming months. * Assuming 1.5 million units generated from 1 MW solar PV project

Power Exchange India Limited (PXIL) PXIL: Non-Solar RECs trading PXIL accounts for minor share of the trading in terms of volume of non-solar RECs traded i.e. 113211 resulting in monetary transaction of 282.41 million INR. Average price of non-solar RECs over trading sessions has been Rs. 2495, Rs. 125 above the average price of Rs. 2620 traded at IEX. Trading of Solar RECs over PXIL shows almost similar clearing price as that observed at IEX and volume traded is also quite comparable. Non-solar RECs at PXIL trading (as on 26-Jul-2012) 60000 50000

Clearing Volume Buy Bids Sell Bids

40000 30000 20000 10000 0

Solar RECs at PXIL trading (as on 26-Jul-2012) 140 120 100 80 60 40 20 0

130

13,000 12,506

100

12,800

86

22 5 May-12 Clearing Volume

6 Jun-12 Selling Bids

13,300 12,800 12,300 11,800 11,300 10,800 10,300 9,800 9,300

Jul-12 Clearing Price

PXIL: Forecast for Non-Solar RECs trading The trend of clearing volume for non-solar RECs at PXIL over a quarter is A-shaped. Hence, higher clearing volume is expected from the next trading session in Aug.

REC Potential for 2012-2013 Renewable Energy Certificates trading started in March 2011 on power exchanges IEX and PXIL. As can be observed from available data (also presented in the article above), trading activity has been increasing with each passing month with a couple of exceptions. In this context, it becomes very important to understand the potential of REC trading for a particular year. In order to give an insight on this potential to stakeholders in the RE sector, we have done a basic analysis of the state-wise RPOs in energy and monetary terms. Based on the CEA figures for energy availability of states for 2011-12 and taking into account the average increase of 7% in energy requirement over last few years, the energy requirement for 201213 works out to 10,02,803 Million units. Keeping in line with the shortfall of availability with respect to requirement over the last 2 years (deficit of 8.5%), the availability is likely to be 9,17,565 units. However, these figures need to be broken down into respective state-wise figures in order to apply the state-wise RPOs and arrive at RPO requirement in energy terms. Here is our estimate of state-wise RPOs in REC terms for the year 2012-13 based on the CEA data and demand growth rates thus far. Figure 1: REC Market Potential for 2012-13

State Andhra Pradesh Arunachal Pradesh Assam Bihar Chattisgarh Delhi (Draft) Goa and UTs Gujarat Haryana Himachal Pradesh Jammu and Kashmir Jharkhand Karnataka Madhya Pradesh Kerala Maharashtra Meghalaya Manipur Mizoram Nagaland

Energy Available for Distribution (Million Units) 91109.43 591.71 6094.72 12048.2 15638.05 28541.18 12989.8 79648.66 38028.87 8674.49

Solar RPO

No. of Solar RECs

Non-Solar RPO

No. of NonSolar RECs

0.25% 0.10% 0.15% 0.75% 0.50% 0.15% 0.40% 1.00% 0.25% 0.25%

227774 592 9142 90362 78190 42812 51959 796487 95072 21686

4.75% 4.10% 4.05% 3.25% 5.25% 3.25% 2.60% 6.00% 1.75% 10.00%

4327698 24260 246836 391567 820998 927588 337735 4778920 665505 867449

11651.23

0.25%

29128

4.75%

553433

6452.1 57804.61 20829.69 44289.44 126176.54 1551.5 533.93 379.85 546.77

1.00% 0.25% 0.60% 0.25% 0.25% 0.40% 0.25% 0.25% 0.25%

64521 144512 124978 110724 315441 6206 1335 950 1367

3.00% 7.25% 3.40% 3.35% 7.75% 0.60% 4.75% 6.75% 7.75%

193563 4190834 708209 1483696 9778682 9309 25362 25640 42375

Orissa Punjab Rajasthan Tamil Nadu Tripura Uttar Pradesh Uttarakhand

24281.51 46857.44 52955.37 82074.35 963 77164.12 10922.56

Total

858799.12

0.15% 0.07% 0.75% 0.25% 0.10% 1.00% 0.05% 0.37% (average)

36422 32800 397165 205186 963 771641 5461 3662875

5.35% 2.83% 6.35% 9.75% 1.90% 5.00% 5.00% 4.83% (average)

1299061 1326066 3362666 8002249 18297 3858206 546128 48812331

* West Bengal and Sikkim have not recognized REC mechanism and hence have not been considered

As can be seen from the table, RPOs for 2012-13 in terms of RECs work out to be around 3.66 million for Solar RPO and 48.81 million for Non-Solar RPOs. It can also be observed that these figures are in line with the average all-India Solar RPO which is 0.37% and Non-Solar RPO which is 4.83%. At Floor price, market value of these RECs is as below. Figure 2: Market Value of RECs at Floor Price (Minimum Clearing Price) Solar (@Rs.9300/REC)

Non-Solar (@1500/REC)

No.of RECs

3662875

48812331

Market Value (in Rs.Crores)

3406.47

7321.85

While the figures mentioned above sound whopping and project a tremendous potential, it is important to consider that not entire RPOs will be met using RECs and in some cases may not be met at all. There are a few important factors which affect the above projections:   



Obligated entities may meet all/part of their respective RPOs by actually purchasing Renewable Energy or by setting up their own plants. RPO enforcement: Several obligated entities may not fulfil their RPO obligation unless CERC enforces strongly. Financial strength of DISCOM: Several DISCOMs may not be in a position to meet their RPOs due to their already bad financial condition. This can result in RPO-relaxation for the financial year unless those DISCOMs receive financial support from the Govt. Availability of Solar RECs: The Solar REC market will be hugely affected by lack of RECs as there is very little capacity (18.16 MW) registered till date and only slightly more is expected in the current year.

These factors have a tremendous and uncertain effect on the estimates provided above. However, there are also a few factors which might give a boost to REC trading. The following are few such factors which indicate that the trading will be well above that of 2011-12: 

Central Public Sector Enterprises (CPSEs) have been given a mandate to dedicate a % of their profits to “Sustainable Development” initiatives. REC mechanism comes in handy for these

enterprises as RECs have been recognized as a way to meet part of the Sustainable Development goals of CPSEs.



Increased RPO obligations of most states as per their respective RPO policies.

  

More states have release their RPO obligation notifications in the last year. CERC has assured that it would enforce non-compliance more strictly. Voluntary purchasers have already begun purchasing RECs in the last year and this might only go up this year as more corporate are eyeing REC market to show their commitment to environment and clean energy.

As in Figure 1, we have calculated REC potential for 2011-12 (based on the RPOs back then) which works out to be 41532936 Non-Solar RECs. The actual number of Non-Solar RECs traded in 2011-12 was 1015274 which is a mere 2.45%. It could be that a part of the remaining was met using purchase of Renewable Energy or by self-generation. But for most part, it is well known fact that majority of the RPOs were not met. We haven’t calculated the figures for Solar RECs as no trading happened last year. The following table talks about 3 different scenarios for projecting possible Market trading for 2012-13. Figure 3: Market trading potential for 2012-13 based on scenarios Solar Estimated Market trading

Non-Solar Based on last year Rs. 179.39 Crores (2.45%)

Based on last year

NA

@0.5% of potential

Rs. 17.03 Crores

@10% of potential

Rs. 732.19 Crores

@2% of potential

Rs. 68.13 Crores

@20% of potential

Rs. 1464.37 Crores

Now, it is important to note that the above figures are based on Floor Prices only which is the reason for the Non-Solar REC Market trading projection (Rs.179.39 Crores) for 2012-13 to be lesser than last year’s figure of Rs.286.24 Crores (average Non-Solar REC price for 2011-12 was Rs.2819). It can be stated with fair amount of confidence that the Non-Solar trading for 2012-13 would be more than that of 2011-12 as the first 4 months of this year have already witnessed trading worth Rs. 144.55 Crores. ** Please note that the most of the figures in this article are estimated based on available data and do not guarantee the actual trading to follow these figures. As already stated above, various factors may impact the trading for the year.

As always, we shall monitor the market very closely and keep you updated. Assumptions: All the figures have been arrived at based on CEA’s data for 2011. The following are a few carefully made assumptions:  Average growth rate of energy demand: 7%  Average deficit in availability as compared to demand: 8.5%  Available energy covers the needs of State DISCOMs, Captive Power Producers (CPPs) and Open-Access Consumers i.e. Obligated entities.

Renewable Energy News World’s most efficient Colloidal Quantum Dot (CQD) Solar Cell: A Quantum Dot Solar Cells are nothing but Quantum Dots being used as photovoltaic material as opposed to Silicon, CdTe, CIGS or any other material that is currently using in making Photovoltaic Solar Panels. Quantum Dots are minute particles of semiconductor material that have a band-gap which can be tuned to absorb any wavelength which is what makes them ideal for Solar cell use.

(Image Source: Cleantechnica.com)

Previously, it was not possible to make CQDs that are capable of absorbing a wide-range of solar spectrum and were of low efficiency. However, researchers from University of Toronto and King Abdullah University of Science and Technology (KAUST) have jointly created CQDs that have solved this. Here are a few features of the CQD:    

Efficiency of 7% which is 37% more than the previous held record. Capable of harvesting electricity from entire solar spectrum. Inexpensive to create which is the need of the hour as it would help increase solar energy adoption across the world. Can be fabricated on flexible substrates (as in Thin-film technology)

For more information, please check http://cleantechnica.com/2012/08/06/new-record-efficiencyfor-next-gen-solar-cells/2/

26% of energy from Renewables: In the first half of the year, Germany generated 26% of its energy from Renewable Energy Sources. This corresponds to 67.9 TWh i.e 67.9 billion units of energy. Of this, 36% came from Wind, 22% from Biomass, 21% from Solar PV, 15% from Hydro and the remaining from other RE sources. Germany is on the path to completely eliminate Nuclear which contributes to 20% of the energy mix. No wonder then that Germany is generating 184 Gwh/day only from Solar Power. Check out this nice infographic.

(Image Source: Cleantechnica.com)

For more information, check http://cleantechnica.com/2012/07/26/germany-26-of-electricity-fromrenewable-energy-in-1st-half-of-2012/

Bladeless Wind Turbines: It might sound weird to hear that a Wind Turbine does not have blades because that is the basic understanding everyone has on Wind Turbine technology which is around 400 years old. However, one company seeks to break this line of thinking by creating a bladeless wind turbine.

(Image Source: saphonenergy.com)

Tunisia based Saphon Energy has created a device called Saphonian which harvests energy from wind without any externally visual moving parts. Though it is a patented technology, one of the

wildest guesses which might come close (in theory) to achieve this bladeless wind energy capture technology is that the device might be housing some kind of vibrating parts which vibrate as wind hits them thus creating a Piezoelectric kind of effect from air. Let us know if you have any other wild guesses in mind. Check http://www.saphonenergy.com/ for more information on the innovation.

What next? Pretty soon we will publish a white paper on REC Markets which will have lot more information and analysis and will give our readers a complete understanding of the IN and OUT of REC Markets. We promise you that! We are also working on an REC Calculator which will be put up on our website (http://efficientcarbon.com/) before the next issue of “RE Chronicles” in September. Our next issue will contain:  Monthly update on REC trading  Capacity additions on the REC based projects  State-wise RPO obligations for 2012-13  More interesting and exciting articles on Renewable Energy developments from across the world and India.

Editorial Team -------------------------------------------------------------------------------------------------------------------------------------Pradeep Palelli Varun Mittal Managing Partner, Freelance Writer (Renewable Energy) EfficientCarbon -------------------------------------------------------------------------------------------------------------------------------------We would love to hear from you. Drop us an email to [email protected] or give a call on +91-9052224701. Thank you!

About EfficientCarbon EfficientCarbon (http://efficientcarbon.com/) is a Hyderabad based company working in the Energy, Environment and Sustainability domain. We provide focussed services in the following areas:

Renewable Energy Technical Consulting

REC Advisory

Carbon Management

Sustainability Strategy

Energy Efficiency and Energy Management

CDM facilitaion

Our team consists of graduates from respected institutions such as BITS-Pilani and IFMR-Chennai with several years of experience in companies like Infosys, Godrej and Titan. We are also supported by a team of advisors who, on average, have more than 25 years of experience in the above mentioned 6 different areas. We have successfully executed several projects for our esteemed clients such as Maha Cements, Andhra Pradesh State Co-operative Bank (APCOB), Ramco Systems, Capital IQ, GTP Granites and Andhra Pradesh Pollution Control Board (APPCB). Renewable Energy and REC Advisory: We have a highly qualified team with expert knowledge on the commercial and technical aspects of various Solar Energy technologies. Also, we pride ourselves in being capable of delivering the best services on the REC front as we are backed-up by a powerful back-end which constantly monitors the REC Market.

Renewable Energy Certificates

Solar Power Plants

Accreditation, Registration, Issuance and Trading

Financial Analysis for Industrial and Gridscale Evaluating technology options

Financial Analysis for projects Market Assessment and Pre-Feasibility Reports Market Intelligence

Preparing Bid documents for tenders