Sustainable Development is Serious Business Over the past decade, organizations worldwide have faced uncertain market

conditions, declining natural resources, increasing cost of production and aggressive

competition. This, coupled with rigorous regulatory and policy changes has added to

the need for them to strengthen business foundations through sincere efforts at

understanding and implementing business sustainability. As understanding of

business impacts, risks and opportunities evolves over time, ways of doing business

are undergoing significant change. Companies are trying to enhance business

performance by addressing not only financial challenges, but also social, economic

and environmental factors.

Volume 2 Issue 7

HORIZONS

agneya

31 October, 2012

Source: MERC Tariff orders for MSEDCL

Limitations in domestic coal

supply, high costs of imported

coal and high technical and

commercial losses in the network

contribute to increasing consumer

tariffs. For many industries, it is

lack of power, not shortage that is

pinching – high cost diesel

generators are being used for

running operations instead of

backup.

0

100

200

300

400

500

600

700

800

Oct-

06

Ap

r-0

7

Oct-

07

Ap

r-0

8

Oct-

08

Ap

r-0

9

Oct-

09

Ap

r-1

0

Oct-

10

Ap

r-1

1

Oct-

11

Ap

r-1

2

Energy charges (Paise/ unit)

Energy charges (Paise/ unit)

Linear (Energy charges (Paise/ unit))

Innovation

Capital Efficiency

Risk Management

Growth Enhancement

Social Justice

Diversity

Human Rights

Community Outreach

Labour Relations

Clean Water/Air

Emission Reduction

Biodiversity

Environmental Research

Recycling/Composting

Job Creation

Skill Enhancement

Local Economic Impact

Business Ethics

Resource efficiency

Green energy

Product stewardship

Improved technology

Environment Justice

Health and Safety

Climate Change

Environment

Regulations

Elements of Business

Sustainability

Sustainable Growth – Focus on Renewable Energy

Environment is a key focus area for companies planning for sustainable growth.

Further, energy usage is one of their topmost concerns.

2

Financing

Commercials

Technology

Renewable energy is not just a possible answer to climate change but more

importantly, is a valuable source of energy and increasingly, an important part of the

economy. In the recent American Presidential campaign debate for example,

President Obama reiterated support for production tax credit to wind energy as it

encourages investment in clean energy and creates jobs. RE is not without its

downsides but it has many benefits to offer. Countries like India stand to gain a lot if

they can contribute to all stages of the RE value chain – from R&D to manufacturing.

Difficult Times – A Test of Commitment

Commitment to sustainable development is tested under difficult economic

conditions. The Kyoto protocol was adopted in the 90s to reduce the impact of GHG

emissions. Developed countries took up mandatory emission reduction targets under

this protocol. However, due to recent economic downturn, these countries are

beginning to doubt their ability to meet their targets for 2016.

The challenge is even greater for developing countries like India. The electricity

sector contributes more than 35% of the total GHG emissions in India. Increasing

maturity of wind power, falling cost of solar power and introduction of programs like

RPO and REC market have presented companies with an opportunity to take a step

towards energy sustainability by shifting part / full consumption to renewable energy

without taking a hit to the bottom line.

Companies that have

invested in Renewable

Energy

Shortage of coal is estimated to

continue in the near future as

environment clearance and land

acquisition issues take time to

resolve.

India’s coal inventory fell

drastically to 7.5 million tonnes –

13% lower than the previous

month and lowest in many years

even though there was a small

rise in the coal production by CIL.

This shortage is a risk for

companies in terms of costs and

shortage of energy. To mitigate

this risk, many companies have

either invested in Renewable

Energy or have contracted with a

third party supplier so that they

can fix part of their electricity cost

with predictable increase in the

future.

This approach also helps some

companies to meet mandatory

targets set by SEBI on

Environmental, Social and

Governance (ESG) disclosures.

0 5 10 15 20 25 30 35 40

Community involvement/support

Employee well-being and benefit programs

Water Usage

Recycling

Energy Usage

Top 5 sustainability concerns for organizations

Source: Evolution of sustainability practices, AICPA, CICA, CIMA

research study

20 MW, Wind,

Captive

consumption

8.7 MW, Wind; 0.4

MW Solar; Captive

consumption

51 MW, Wind,

Captive

consumption

15 MW, Wind,

Captive

consumption.

REC Trade October 2012

Buy Bids Sell Bids Volume Traded Clearing

Price Rs. per REC

Non-Solar

IEX 1,32,231 8,51,177 1,32,231 1,500

PXIL 30,469 1,61,483 30,469 1,500

Solar

IEX 1,263 864 820 12,680

PXIL 2,100 1,012 971 12,500

96 106 112

172

206 200

71

169

236

158

274 264

223

-

500

1,000

1,500

2,000

2,500

3,000

3,500

-

50

100

150

200

250

300

Total IEX & PXIL Non-solar REC Trade

IEX and PXIL Whole Volume Trade in Thousands Price at IEX (RHS) Price at PXIL (RHS)

3

REC Market in October 2012

RE Newsletter

RPO Compliance to drive market in short term

With supply of non-solar RECs outstripping demand by six times, the trading

session closed at the floor price. With inventory reaching a new high, next trading

session could be a good opportunity for Obligated Entities to fulfill their obligation

as prices may start rising from next year as the date for compliance for FY 2012-13

comes closer and due to possible enforcement of RPO compliance backlog.

REC Inventory

Source: REC Registry

Solar RECs Record

Highest Traded Volume

The October trading session saw

1,791 Solar RECs traded – the

highest volume so far. This can

be attributed mainly to the

increase in buy bids and sell bids

at PXIL which for the first time

overtook those of IEX. The total

value of trade was recorded at

Rs. 2.2 crores, also the highest

so far.

9,02,320

12,98,258

6,18,638

2,22,700

Opening Issued Redeemed Balance

REC Inventory Oct 2012

agneya

Source: IEX & PXIL

172

384

271

149

93

158

73

335

106

250

62

107

167

0

500

1000

1500

2000

2500

3000

3500

0

100

200

300

400

500

600 Capacity Registered, MW

Cum. Registered till Date(RHS) Registered

State-wise Registered

Capacity, April 2012 to

date

State MW Tamil Nadu 333 Maharashtra 283 Gujarat 140 Karnataka 127 Andhra Pradesh 71 Madhya Pradesh 34 Rajasthan 27 Uttar Pradesh 20 Uttarakhand 20 Bihar 12 Chhattisgarh 12 Punjab 11 Odisha 6 Himachal Pradesh 4 Total 1,100

Source-wise Registered

Capacity, April 2012 to

date

Source MW Wind 810 Bio-fuel cogen 139 Biomass 127 Solar PV 18 Small Hydro 6 Total 1,100

4

In total, 167 MW of capacity was registered of which 42% was registered from

Andhra Pradesh in October. With this addition, the capacity registered in this

financial year has touched 1,100 MW.

agneya

Agneya is promoted by alumni of IIM Ahmedabad. We provide services in the following areas –

Renewable Energy – advising clients on the best possible portfolio of renewable energy (wind, solar, bio) across tariff regimes,

technology options, electricity sales structuring and availing incentives like REC and GBI.

Renewable Energy Regulations – advising clients on regulatory aspects of electricity market, options for realizing the maximum

value from their energy assets and minimizing costs related to regulatory compliance including addressing RPO.

Carbon & Energy – measuring carbon footprint, current/future energy profiling, and setting up energy management systems to

assess risks and opportunities related to energy security and climate change.

Sustainability – building robust long term foundations for business i.e. managing economic, environmental and social aspects of

business. These include establishing sustainability management framework and reporting as per GRI guidelines.

For further information on Renewable Energy Certificates or other services, please contact us at –

E-mail – rahul@agneya.in | Phone – +91-20-4120 3800, +91-88 06 07 07 83 | Website – www.agneya.in

Source: REC Registry