REC Trading – September 2011

The REC trading for the month of September concluded recently. Trading figures reveal that the trading has increased significantly both in volume of RECs traded as well as the price.

In total 46,362 RECs were sold. Keeping with the trend of previous months, IEX had a higher share of the market with 41,385 (89%) RECs traded while PXIL saw trading of 4,977 (11%) certificates. The large volumes of trading indicate that the obligated entities are trying to fulfil their RPO as soon as possible as REC prices are showing an upward trend.

The most encouraging part of the trading was the price paid for each certificate. The price of REC grew to Rs. 2300 from Rs. 1800 last month.

Interestingly, there are 7 buy bids for solar REC; up from the lone buy bid last month, although this is promising, it highlights a serious issue. As with the previous months, there are no solar RECs available as no projects are registered under REC. This is a worrying trend and is going to put immense strain on the obligated entities to fulfil their solar RPO. The reasons for lack of solar projects registered under REC could include

• Higher payback period for solar projects
• REC prices guaranteed only up to 2016-17
• A combination of the above two greatly reduces the bankability of solar projects

Conclusion

The increase in REC trade volumes and price is very encouraging. It shows that the mechanism is a viable revenue route for developers who have not signed any preferential PPA. The demand for REC certificates is bound to keep increasing as more and more obligated entities try to fulfil their RPO in the short time span available. This is scheduled to push the REC price even further which in turn could lead to REC prices hitting their forebearance highs in the coming months. Finally more effort needs to be put in to ensure that there is sufficient supply of solar RECs in the market.

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