REC vs ESCerts Trading

Bangalore | New Delhi | Mumbai | Chennai | Hyderabad | Indore

India’s Largest REC Trading Company

Anuj Hemant Xess

2

Designated Consumers- Aditya Birla Group Salient features of REC

1 REC= 1 MWH

Price defined by CERC ( upto March 2017)

Steps for obtain REC

Accreditation of the project with SNA

Registration with NLDC

NLDC issues RECs for energy injected to the grid which is approved by local SLDC ( monthly cycle)

Monthly trading at the power exchanges

Every last Wednesday of the month

Market clearing price is the outcome of demand and supply

Validity - 3 years from date of issuance

Floor Price (Rs./REC) Forbearance Price (Rs./REC)

Non Solar 1,500 3,300

Solar 3,500 5,800

3

Designated Consumers- Aditya Birla Group Comparison – REC vs ESCert mechanism REC ESCert

Price of the certificate

• Floor and forbearance price • No concept of floor and forbearance price • Price to be capped as a penalty price which is determined by market price of coal, gas and crude oil

Enforcement of the regulation

• State RPO regulations are the key drivers of the market • Currently it lacks strict action by SERCs

• BEE/SDAs are the drivers • Strict compliance monitoring is must • Adequate capacity building required

Role of stakeholders in trading

• Compliance auditors cannot participate in providing any kind of services to REC beneficiary- CERC

• PAT regulations safeguards involvement of auditors role in the auditing and verification activities • Auditing firms should be kept away from trading ESCerts

Retention of certificates

• Retention of RECs is allowed within same company/legal entity (not allowed within group companies)

• No such provision defined • BEE may allow offset within same legal entities.

4

ESCerts Issued- Next Step ?

• ESCerts account will be maintained at the depository

• The unit will have to be registered

Registration with the depository

• Traders are basically members at the power exchange

• Trading will take place through a registered member

Choose a trader

• Register with one or both exchanges

• Required for trading transaction

• To be opened with major banks like HDFC, SBI etc

Register with Exchange/

Settlement account with the bank

The above steps are in line with current REC trading procedure at the power exchange

5

Designated Consumers- Aditya Birla Group How power exchange trading works Example - Double Sided, Closed Bid, Uniform

Priced Auction ( practised in power and REC ) BUY Bids

B1 5 MW @ Rs. 3000

B2 2 MW @ Rs. 4000

B3 8 MW @ Rs. 3500

B4 3 MW @ Rs. 2500

SELL Bids

S1 4 MW @ Rs. 2500

S2 5 MW @ Rs. 3000

S3 2 MW @ Rs. 3500

S4 6 MW @ Rs. 4000

Pri

ce (

Rs.

/MW

h)

Volume (MWh)

5 10 15 20

2500

3000

3500

4000

MCV

MCP

B2

B3 S3

B1

B4 S1

S2

S4

6

ESCerts- Bank or Sell ?

Deciding factors

• Current cost of reduction

• Cost of next year target

• Likely cost of future reductions (A)

Savings target exceeded

ESCerts

Penalty/purchase ESCerts

If A> cost of

ESCerts

Bank (only 25-30 % will be

allowed)*

Sell

Target is expected to exceed next cycle

Yes

No

Yes

Yes

No

No

Other factors

• Expansion/reduction plan

• New efficient technology to be used

• Demand and supply situation

* Response to frequently asked questions by BEE

7

Designated Consumers- Aditya Birla Group Market propositions

OTC transactions

Not defined in REC mechanism as well

Risks- liquidity concerns, irrational price exchange, chances of foul play

Will be beneficial for the stakeholders when the market size grows

Fungibility

Possibilities has been discussed in the past

Issue is units ( REC is in MWH whereas ESCert is in Tonnes of oil Equivalent)

Will require a regulatory change

Voluntary purchase

To promote EE

In REC – Organisations have come forward and purchased RECs voluntarily (POSOCO purchased RECs in the past; BEE, MOP may allocate fund to purchase ESCert)

8

Current situation

Based on a press release by BEE dtd 24.11.12 * Annual (unverified) reporting by the designated consumers at the end of the year 2013-14

478

217

60

201

0

100

200

300

400

500

600

Total number of DCs

Target met Will meet the target

Balance

• Demand of ESCerts is likely to be robust • Price of ESCerts will play a key role in the market

• * Issuance and trading of ESCerts to take place between Aug and Nov 2015

9

Services Offered by REConnect

ESCerts Trading Services

• Option to trade ESCerts either at IEX or PXIL, or at both the exchange

• Issuance support - follow up, liasioning with the depository/MOP

Strategy for monetization

• Market trading strategies and analytics to maximise the value of DCs

• Market intelligence report and notes

Compliance procedure support

• Support during compliance audits/ other information requirement

• Support on an ‘as needed' basis

ABOUT RECONNECT

11

Management & Team

Education Key Positions / Experience Current Engagement

Prof. S A Khaparde PhD – IIT Kharagpur

• Member (Advisory Committee): MERC, IEX,

• Member – Indian Smart Grid Forum

Professor, Dept. of EE, IIT Bombay

Bruce M Usher MBA – Harvard Business School

• CEO – EcoSecurities (World’s largest Carbon trading firm)

• CEO – Treasury Connect LLC • Chairman – Persistent Energy

Partners

Executive in Residence – Social Enterprise Program Columbia B-School

Vibhav Nuwal (New Delhi)

MBA – Columbia Business School

• Carbon Finance – Managing Emissions

• Worked with J P Morgan, Arthur Andersen, LEK Energy (UK)

Director (Head – RPO Market)

Vishal Pandya (Bangalore)

M.Tech – IIT Bombay

• Power Trading & REC - IEX • Sub-station Designing – L&T

Director (Head – Electricity and Market Analytics)

Ramkumar (Mumbai)

MBA - Symbiosis • Carbon Advisory – GENSOL • Marketing – Chequered Flag

Director (Head – REC Market)

Madhusudan C (Bangalore)

MBA – RSM, The Netherlands

• Tech Director – Erasmus Medical Center, Netherlands

Chief Technology Officer (Head – IT Systems)

Ad

vis

ory

B

oard

C

ore

Team

12

Equity Partner – INFUSE (IIM Ahmedabad)

India’s first CLEAN-TECH Venture Fund

• An MNRE + IIM Ahmedabad initiative

• Core Focus – To promote innovation in Indian

Clean-Tech space with focus on Energy &

Renewables

Key Venture Partners supporting INFUSE

13

Renewable

Generation

CPPs / Industrial

Consumers

Access to Market

Market Position

• 3,000 MW of RE capacity under management • Projects present across 16 States • Key Clients: OGPL, ReNew, GAIL, NALCO, GreenInfra,

Mytrah, ILFS, Vish Wind, Tadas, TNPL, SPB, ITC, iPaper, TVS, GFL, TVH, Renuka, Polyplex Hydro, Karma Energy

• Working with

• ACC, Aditya Birla, JK

Cement, Maihar

Cement, IFFCO, SRF

Limited etc.

• ~1,000 MW of RPO

portfolio

• Member at IEX & PXIL • India’s largest REC Trading Company

• 46% Market share in Non-Solar RECs • 95% Market Share in Solar RECs

14

Our presence in Indian Renewable Market

REConnect Office

CPP/Open Access Client [~1,000 MW]

RE Generation [~3,000 MW, all size, all types]

Wind/Solar Forecasting & Scheduling [~1,000MW]

Bilateral Power Transactions [~40 MW]

15

Other Services Offered by REConnect

REC/RPO Services

• End to end services under REC scheme ( Accreditation and

Registration of the Project , Issuance and Trading of RECs)

• Complete RPO assessment and strategy for compliance

• Detailed evaluation of each unit including state regulations

and likelihood of enforcement of RPO

Forecast / Scheduling (

Wind and Solar)

• Provide close to real time day ahead forecasts and schedule

to SLDC

• Daily/weekly/monthly MIS reports

• Provide schedules to SLDC and coordinate the

communication

Electricity Portfolio

Management

• Single window to cheaper and green power ( PX and Intra

state/bilateral)

• Short /Medium/Long term strategy for power procurement

• Liasioning/Regulatory assistance

CONTACT US

Bangalore #2,Victor Mansion, 2nd Floor Kodihalli, Old Airport Road , HAL 2nd Stage (PO) Bangalore – 560008 INDIA (O): 080-6547 3383/84 (F): 080 – 3072 3571

Our other presentations • Renewable Energy Certificates • Renewable Purchase Obligation • Renewable Regulatory Fund • Electricity Portfolio Management

New Delhi C-503, Nirvana courtyard, Nirvana Country, Sector 50 Gurgaon 122018, Haryana (O): 0124-4103 216 (F): 080 – 3072 3571

Mumbai F-159, Haware Fantasia Business Park, Plot No 47, Sector 30 A, Vashi, Navi Mumbai-400703 (M): 9930359992 (F): 080 – 3072 3571

Chennai #18/1 (88), Aarya Gowda Road, 2nd Floor, West Mambalam, Chennai - 600 033, India (M) +91-99404 78306 (F): 080 – 3072 3571

THANK YOU!!