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™

By: VISHAL PANDYA

Prepared for CII

Date: 27-09-2012

RENEWABLE ENERGY - OPPORTUNITIES

2

RE

NEWA

BLE EN

ER

GY CE

RTIFIC

ATE (REC) IN INDIA

REConnect Energy Solutions (Pvt.) Ltd.

Value Proposition

Renewable Energy Certificates (REC)

What do we do?

How does it work?

Electric

Grid

REC Market

We help companies Buy and Sell

RECs & Promote Green Energy

Electricity

Electricity

Green

Credits

Client Segmentation

Renewable Energy (RE)

Generators

Wind, Small Hydro

Biomass, Biogas, Co-Gen

Solar

Obligated Entities

Cement

Steel, Aluminum

Pulp & Paper, Textiles

Legal Mandate –

Renewable Purchase

Standards

REC MECHANISM & RPO

4

Renewable Portfolio Obligation (RPO) Mandatory purchase of certain % of Renewable Energy

Obligation can be fulfilled by: By consumption of physical Renewable Energy or

By purchasing RECs (Solar & Non-Solar)

Non-Compliance will lead to Penalty Penalty to the tune of Maximum Price of RECs

Penalty under Section 142 of the Electricity Act-2003

REconnect Energy Solutions (Pvt.) Ltd.

The RPO

Obligated Entities Authority Exclusivity

1. DISCOMs 2. Captive Power Plants 3. Open Access Consumers

SERC 1. Solar RPO 2. Non-Solar RPO

5

Renewable Energy and Environmental Attributes

• RECs are similar to carbon credits – they are tradable and will be available to RE power producers

• They will be traded domestically

• Electricity distributors and captive generators will have legally binding obligations to purchase RECs

RE Producer

Grid

Electricity

Payment

Energy Attributes

Environmental Attributes

Carbon Credits

REC’s

+

Traded in Global Market

Tradable in Indian Market

Payment


6

CERC Regulation on REC: Key Provisions

REC a valid instrument for RPO Compliance

REC Denomination = 1 MWh

Two categories of RECs:

Solar REC (For Solar Thermal and Solar PV)

Non-Solar RECs (For Wind, Small Hydro, Co-Gen, Biomass etc.)

Floor Price and Forbearance Price for REC (prices in INR/REC)


FY 2011-12 FY 2012-17

Floor Forbearance Floor Forbearance

Non-Solar 1500 3900 1500 3300

Solar 12000 17000 9300 13400

7

Status of RPO (FY 2012-13) – As on 30th April 2012

0.00%

2.00%

4.00%

6.00%

8.00%

10.00%

12.00%

% R

PO

as im

ple

me

nte

d

Non-Solar RPOs across India

2011-12

2012-13

Marginal Incremental change in Non-Solar RPO

SOLAR REC MARKET – AN INSIGHT

9

Status of RPO (FY 2012-13) – As on 30th April 2012

Higher Incremental change in Solar RPO

0.00%

0.20%

0.40%

0.60%

0.80%

1.00%

1.20%

% R

PO

as im

ple

me

nte

d

Solar RPOs across India

2012-13

2011-12

10

Demand for Solar Power / RECs?

FY 2011-12


FY 2012-13

1050 MW

2100 MW

500 MW

1200 MW?

Demand

Supply

11

Expected Solar Market by 2020

Huge potential to tap

960 1027 1099 1176 1258 1346 1441 1542 1649

0.00

0.50

1.00

1.50

2.00

2.50

3.00

3.50

0

5000

10000

15000

20000

25000

30000

35000

2012 2013 2014 2015 2016 2017 2018 2019 2020

Solar RPO vs. Solar MWs required to meet RPO

Energy

Consumption in

BUs

Solar MWs

required to meet

RPO

Solar RPO in %

12

RE

NEWA

BLE EN

ER

GY CE

RTIFIC

ATE (REC) IN INDIA


Market History

REConnect’s Portfolio Largest REC Trading Company in India (100% market share in Solar RECs)

Projects under Management 2100 MW

100+ Clients, 190+ Projects (as on 31st August 2012)

Managing projects across 16 States in India

Physical presence in 6 States

% Market Share

424 260

18,502 16,385 18,568 25,096

46,362

95,504 1,05,527

1,11,621

1,71,524

2,06,188 1,99,737

71,226

1,68,675

2,36,485

1,58,220

2,73,893

50 0 0 225 50 2139 6568 16452 21349

30256 37006

78604

92552

54748

94682

118367

92916

172102

2,818

1,500 1,500 1,505

1,554

1,789

2,300

2,710

2,891

2,950

3,051 3,065

2,907

2,201

2,379 2,405

2,014

1,505

-

500

1,000

1,500

2,000

2,500

3,000

3,500

-

50,000

1,00,000

1,50,000

2,00,000

2,50,000

3,00,000

Mar

ket

Cle

arin

g P

rice

(R

s./N

on

-So

lar

REC

s)

Mar

ket

Cle

arin

g V

olu

me

Trade Month

REC Market Performace So Far

Total MCV

Market Share- REConnect

WeightedAverage -MCP

12 0 .3 14 20 21 46 56 59

0 1 9 17 27 39 77 50 63

13

REC markets – looking ahead

Weak enforcement:

Lack of enforcement action so far

Inadequate regulatory provisions – this will need changes in the Electricity Act

Regulatory issues

Legal impediments in some states (Raj, Guj, TN)

RPO provisions are getting diluted due to Co-gen order of APTEL

Situation of oversupply in the market

Weak financial situation of Discoms is unlikely to change in the near term

Significant changes planned

Forward markets

Simplify regulations (eg. ED clause)

However, legal and enforcement issues may take time to get sorted

With most other incentives gone, REC is likely to be the only incentive mechanism for RE growth in the future

Recent tariff increases and RPO cost pass-through are encouraging sign of possible Discom participation

14

RE expansion plans are ambitious, but incentives are inadequate

0

5000

10000

15000

20000

25000

30000

35000

Plan Achieved Plan Achieved Plan

Solar

Bio Power

SHP

Wind

10th Plan

11th Plan

12th Plan

With AD gone and GBI not yet renewed, REC is the only remaining incentive for RE growth

The 12th plan is the most ambitious in terms of RE growth

REC is the only remaining incentive mechanism

This may put pressure on govt/ regulators to clear the hurdles

In a recent conference, MNRE representative stressed that REC mechanism has to work for the next wave of RE growth

15

Who gets RECs?

Captive Use

No Promotional Wheeling*

No Promotional Banking**

No Electricity

Duty Exempt

Third Party Sale / Open Access

Sale at Mutually Agreed Price

Eligible

Sale through Bilateral Contract

Sale at Mutually Agreed

Price

Eligible

PPA with Distribution

Licensee

PPA at Average Power

Purchase Cost

Eligible

PPA at State

Regulated Tariff

Not Eligible Eligible if All Three conditions mentioned

above are met


Not Eligible

Not Eligible

Not Eligible Eligible Eligible KERC

CERC

OPTIONS FOR RE USE

17

Wheeling – The Concept

Wind Mills at lower

voltage level in the

Grid

Distribution System

(11/22/33 kV)

Power Transformer

11/22/33 kV to

66/110/220 kV Transmission Line

Higher Voltage Level and

hence lower transmission

losses

Power Transformer

66/110/220 kV to

11/22/33 kV

Distribution Feeder

(11/22/33 kV)

Industrial Consumer

– End User

Wheeling Charges* ( T&D

Losses + T&D Charges )

* Wheeling charges collected to cover T&D Charges and Losses

18

Banking – The Concept

State Grid Many Generators & Many Consumers

Month kWh Injected

Month-I 5000

Month-II 18000

Month-III 4000

kWh Consumed

Energy Adjusted*

Energy Banked

12000 5000 0

8000 8000 10000

14000 14000 0

* Assumed: Zero Banking Charge

Massive size of state grid adjusts surplus / deficit energy

by changing its own generation / load

19

RE

NEWA

BLE EN

ER

GY CE

RTIFIC

ATE (REC) IN INDIA

Charges Applicable Under Various Options

Sale to DISCOM @ Pref. Tariff

Sale @ APPC

Intra-State OA

Open Access

Cross Subsidy

on Buyer

Transmission

Charges

Transmission

Loss

Distribution /

Wheeling

Charges

Banking

Charges

REC Benefits

Captive with Promotional

Benefits

Captive + Non- Promotional

Benefits

* - For illustration purpose only. Situation varies across states.

20

Emerging Opportunities for GREEN Corporates

Voluntary purchase of REC

Valid to procure RECs and claim Green Benefits derived from RE generation

Bail-Out package from Central Govt for DISCOMs

Tariffs likely to go up

Legal obligation on every consumer to contribute towards RE generation

Own RE generation

o can off-set high cost of DISCOM power

o also avail Green benefits associated with RE generation

Reducing capital cost across RE Technologies

Wind – 4.5-5.5 CR/MW

Solar: 8.5 – 10 CR/MW

Good RoI expected across India

Thank You!

Questions?

Contact us:

#4123, 6th Cross, 19th Main, HAL 2nd Stage, Indira Nagar, Bangalore - 008

080-6547 3383/84

[email protected]

www.reconnectenergy.com

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