REC Mechanism: Opportunity for Investment in Wind Power

Dr. Govind BhagwatikarSiemens Limited: Wind Power

Renewable Energy 2012 Wind Conference Pune, India

29 May 2012 Disclaimer: The views and opinions are of the presentator only.

REC

The CERC issued REC regulations in January 2010. The key objective of the REC mechanism is to promote the development of renewable energy and facilitate its inter-state flow.

This would enable the obligated entities (distribution utilities and open access customers) across states to meet their RPO targets as recommended by the NAPCC.

REC Mechanism

Renewable Energy Generation

Renewable Energy Generation

Sale at Preferential / Feed-in

Tariff

Sale at Preferential / Feed-in

Tariff

Conventional Electricity

Component (APPC)

Conventional Electricity

Component (APPC)

REC Component

REC Component

Obligated Entities: DISCOMs,

Open Access & Captive Consumers

Obligated Entities: DISCOMs,

Open Access & Captive Consumers

Local / Host Distribution

Company

Local / Host Distribution

Company

Obligated Entities: DISCOMs,

Open Access & Captive Consumers

Obligated Entities: DISCOMs,

Open Access & Captive Consumers

The Obligated entities will have to replace approximately 5-7% of their total quantity of power consumed with power generated from renewable energy, or buy it on paper.

*APPC – Av. Power Pooled/Procurement Cost

RPO in Various States

Microsoft Excel Worksheet

REC Accreditation

The Process of getting the RECs:

1. Accreditation State Nodal Agency (SNA)

2. Registration Central Agency (NLDC)

3. Issuance Central Agency (NLDC)

4. Trading & redemption Power Exchange

Features of REC

RE GENERATORs: Wind, Solar, Small Hydro, Bio-mass, Bio-fuel, Co-generation, Municipal Waste, Any GENERATOR approved by MNRE

REC denomination: 1 MWh Categories: Solar & Non-solar Validity: 365 days after issuance Trading platform: Power Exchanges only Trading Calendar: Last Wednesday of the month

Valid up to 2016-17

Eligibility Criteria for getting REC RE Generator not having any PPA at preferential tariff. RE Generator selling electricity to local/host distribution licensee

at a price not exceeding the pooled cost of power purchase of such distribution licensee.

OR RE Generator selling electricity to any other licensee or to an

open access consumer at mutually agreed price or through power exchange at market determined price.

RE Captive power producer (CPP) is eligible for the entire energy generated from such plant including self-consumption subject to condition that CPP has not availed any benefit in the form of concessional / promotional transmission or wheeling charges, banking facility benefit or waiver of electricity duty etc.

Existing projects for which long-term PPAs are already in place will be allowed to participate in the REC scheme after the expiry of their existing PPAs.

REC Traded Price in FY 2011-12

•REC Traded Price - INR 1.50 to Rs. 3.06 per unit

•Av. REC price was Rs. 2.30

•During the year end – Jan-March, REC traded at higher price and volumes were increased.

•This was the first year of REC trading in power exchanges.

Case Study of 6 States

Note: GBI not considered

REC Floor Price – 1.50REC Forbearance Price – 3.30

StateWind Tariff

APCC 2011-12

3 Cases of REC Price APCC + REC

   CERC order at 1.5 at 2.25 at 3 at 1.5 at 2.25 at 3

Gujarat 3.56 2.98 1.50 2.25 3.00 4.48 5.23 5.98

Maharashtra

5.37, 4.67, 3.97, 3.58 2.62 1.50 2.25 3.00 4.12 4.87 5.62

Andhra Pradesh 3.50 2.50 1.50 2.25 3.00 4.00 4.75 5.50

Tamil Nadu 3.39 2.69 1.50 2.25 3.00 4.19 4.94 5.69

Karanataka 3.70 2.66 1.50 2.25 3.00 4.16 4.91 5.66

Rajastan4.46, 4.69 2.60 1.50 2.25 3.00 4.10 4.85 5.60

Rs/kWh

Trend of APPC

StateWind

Tariff

APPC

2009-10

APCC 2010-11

APCC 2011-12

APCC 2012-13

Ref:-------   CERC CERC CERC  

Andhra Pradesh 3.50 1.78 2.52

2.50 (2.00)  

Gujarat 3.56 2.21 2.53 2.98  

Karnataka 3.70 1.85 2.61 2.66 2.73

Maharashtra5.37, 4.7, 3.97,

3.58 2.43 2.51 2.62  

Rajasthan 4.46, 4.69 2.48 2.60 2.60  

Tamil Nadu 3.39 2.62 2.37 2.69  

Dependability on Thermal Power

India

 65.34% In June 2011

Total Thermal Power 116 GW

Coal Based 97

Gas Based 18

Oil Based 1

Coal Demand rising vis-à-vis its Price YoY. So the conventional electricity would be costly, as 60% power in India is generated by Coal-fired stations.

Until 2005, the coal prices were upto Rs. 600 only.Coal India Limited fetched the price of

Rs. 1800-2200 per ton in FY 2010-11 through auctions against the notified price of Rs. 800-1200

Cost of Generation

APPC

APPC will vary with the prices of Coal : Domestic / Imported Gas Diesel / Transportation Water Metal Maintenance charges

Conclusion

Due to dependability on coal, APPC will increase.

This is in turn an opportunity for RE producers.