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Renewable Energy Certificate in India trading high, but trend disappoints

According to reports, although trading in ‘renewable energy certificates’ (REC) touched a new watermark on Wednesday – for the first time the volumes crossed the 200,000-mark – the trend in demand and prices have left market watchers disappointed. As many as 206,188 RECs were traded on Wednesday, of a total value of Rs 62 crore.

On the Indian Energy Exchange, which accounted for 92 per cent of the trading, the average price was Rs 3,066, marginally bettering the Rs 3,051 witnessed in the trading session of January. (Trading happens once a month, on the last Wednesday.)

On Power Exchange of India Ltd, which accounted for the rest, the average price was Rs 3,051.

RECs are generation-based ‘certificates’ awarded (electronically, in demat form) to those who generate electricity from renewable sources such as wind, biomass, hydro and solar, if they opt not to sell the electricity at a preferentially higher tariff.

These certificates are trade-able on the exchanges and are bought by ‘obligated entities’, who are either specified consumers or electricity distribution companies. These obligated entities may either be required to purchase a certain quantum of either green power or RECs.

While this is a matter of satisfaction, what is not is the fact that the total demand for RECs dipped to 390,000 from 432,000 last month. “This dip of 10 per cent is not a healthy indication for the market,” says Mr Vishal Pandya, Director, REConnect, a consultancy that helps green energy producers secure RECs and trade them.

“Settlement price of Rs 3,066 was short of our expectations,” says Mr Umesh Bhutoria, Director, E-CUBE Energy Trading Pvt Ltd, another consultancy. “Looking at the trend over the last few sessions and also the increase in number buy bids (as we are approaching the fiscal-end) we were expecting the price to be around Rs 3,150-3,200,” Mr Bhutoria told Business Line.

Both Mr Pandya and Mr Bhutoria stressed that it is important to see how the regulators enforce the RPO obligations and what sort of penalties are imposed for non-compliance.

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