RECs as a tool to fulfill CSR mandate 07th August,2014 New Delhi Shruti Bhatia Vice President-Policy and Communication In this presentation Introduction to REC Mechanism CSR through Voluntary REC Market International Scenario About IEX Introduction to REC Mechanism What are RECs? Separating green attribute from electricity Issues Bundled Green Power Seller (RE power) Buyer (RPO Compliance) Un-bundled Green Power Electricity Seller (RE power) REC(Green Attributes) •Uneven RE resource distribution •Schedulability •Uncertainty •Transmission Loss & Charge Solution •No geographic barriers • Reduced transaction cost REC(Green Attributes) Buyer (RPO Compliance) Electricity Discoms, Power exchanges , Bilateral Contracts •More shelf life: Flexibility in meeting the RPO Evolution of REC Market in India 10 July 2013 : 2nd Amendment to CERCs REC Regulation proposes clarification on various issues 30th May 2012 : 1st Solar REC Traded 29th Sept 2010 : 1st Amendment (Clarification on eligibility condition of renewable based CPPs 14th Jan 2010 : CERC REC Regulation 28th Mar 2014 : Trade reaches its maximum (3,69,053) RECs 23rd Feb 2011 : Launch of REC Trading on Exchanges Salient Features of REC Mechanism Participation Voluntary REC Denomination 1 REC = 1 MWh Validity 730 Days after issuance (As per CERC order dated 11th Feb’2013) Categories 1. Solar REC 2. Non-Solar REC Trading Platform Power Exchanges only Banking/Borrowing Not Allowed Single transfer only, repeated trade of the same certificate is not possible Transfer Type Floor Price (2012-17)* Solar: Rs 9,300/MWh Non Solar: Rs 1,500/MWh Forbearance Price (2012-17)* Solar: Rs 13,400/MWh Non Solar: Rs 3,300/MWh Penalty for Non-compliance ‘Forbearance’ Price (Maximum Price) Price Guarantee Through ‘Floor’ Price (Minimum Price) *Reference :CERC in its order dated 23rd August, 2011 revised the floor & forbearance price for the period April, 2012 to March,2017 REC Market Participants: Sellers/Eligible Entity ELIGIBILITY CRITERIA Self consumption No promotional Banking/ Wheeling ELIGIBLE PPAs with distribution licensee Sale through: Open Access/Bilateral Sale at Mutually agreed price PPA at APPC PPA at state regulated tariff ELIGIBLE ELIGIBLE NOT ELIGIBLE REC Market Participants : Buyers Obligated Entities • Distribution Companies • Open Access Consumers • Industries consuming Captive Power Voluntary Entities • Corporates under CSR • Individuals REC Mechanism Procedure for ACCREDITION (Through State nodal Agency) Procedure for REGISTRATION (Through Central Agency NLDC) Procedure for ISSUANCE (Through Central Agency NLDC) Procedure for TRADING & REDEMPTION(Through PXs) Trading at IEX Trading Day Last Wednesday of every Month Market Clearing Closed Double sided auction Trading Time 1300-1500 Hrs By 1530 Hrs Verification by Central agency for Valid REC by cleared seller at IEX By 1600 Hrs Central agency confirms REC By 1630 Hrs IEX finalizes trade By 1700 Hrs Buyer & Sellers informed to Central Agency By 1800 Hrs Invoice raised (proof of REC trade) MCP: Rs 2200/REC 3300 2200 3300 Buy@ @ RECSell 100 REC 1500 Rs Rs 100 Price in Rs/REC Cleared volume : 600 RECs 200 REC sell @ Rs 1700 BUY SELL A 100 REC @ Rs 3300 A 100 REC @ Rs 1500 B 600 REC @ Rs 2200 B 200 REC @ Rs 1700 C 200 REC @ Rs 1700 C 300 REC @ Rs 2000 Total 900 RECs 300 REC sell @ Rs 2000 600 REC buy @ Rs2200 200 REC buy @ 1700 600 No of REC Total: 600 RECs June'14 May'14 Apr'14 Mar'14 Feb'14 Jan' 14 Dec'13 40 35 25 2000 20 1500 15 1000 10 5 500 0 0 Price in Rs/REC Traded Nov'13 Oct'13 Sept'13 Aug'13 Buy Bid July'13 Jun'13 May'13 Apr '13 Sell bid Mar '13 Feb '13 Jan'13 Dec '12 Nov '12 Oct '12 Sept'12 Aug'12 Jul '12 Jun '12 May '12 Apr '12 No of REC (in lacs) Non Solar Market : Increasing demand-supply mismatch PRICE 3000 2500 30 June '14 May'14 Apr'14 Mar'14 Feb'14 Jan'14 2 1.8 1.2 10,000 1 8,000 0.8 6,000 0.6 4,000 0.4 0.2 2,000 0 0 Price in Rs/REC Traded Dec'13 Nov'13 Oct'13 Sept'13 Buy Bid Aug'13 July'13 Jun'13 Sell Bid May'13 Apr '13 Mar '13 Feb '13 Jan'13 Dec '12 Nov '12 Oct '12 Sept '12 Aug'12 July '12 June '12 May '12 No of REC's Solar Market: Increasing demand-supply mismatch PRICE 16,000 14,000 1.6 12,000 1.4 CSR through Voluntary REC Markets CSR through Voluntary REC Market Companies Act 2013 provisions effective from 01.04.14: • Section 135 provides: 2% of PAT towards CSR for Companies with Net worth > 500 Cr or Turnover of over 1,000 Cr or Net profit > 5 Cr • Schedule (VII) : Activities which may be included by companies in their Corporate Social responsibility Policies i. eradicating hunger, poverty and malnutrition, promoting preventive health care and sanitation and making available safe drinking water; ii. promoting education, including special education and employment enhancing vocation skills especially among children, women, elderly, and the differently abled and livelihood enhancement projects; iii. promoting gender equality, empowering women, setting up homes and hostels for women and orphans; setting up old age homes, day care centres and such other facilities for senior citizens and measures for reducing inequalities faced by socially and economically backward groups; iv. ensuring environmental sustainability, ecological balance, protection of flora and fauna, animal welfare, agroforestry, conservation of natural resources and maintaining quality of soil, air and water; v. protection of national heritage, art and culture including restoration of buildings and sites of historical importance and works of art; setting up public libraries; promotion and development of traditional and handicrafts: vi. measures for the benefit of armed forces veterans, war widows and their dependents; vii. training to promote rural sports, nationally recognised sports, paralympic sports and Olympic sports; viii. contribution to the Prime Minister's National Relief Fund or any other fund set up by the Central Government for socio-economic development and relief and welfare of the Scheduled Castes, the Scheduled Tribes, other backward classes, minorities and women; ix. contributions or funds provided to technology incubators located within academic institutions which are approved by the Central Government x. rural development projects CSR through Voluntary REC Market • MOCA notification dated 18.06.2014 regarding Section 135 of Companies Act 2013-” Liberal interpretation of Schedule VII (iv)” Schedule VII (iv) Ensuring environmental sustainability, ecological balance …… CSR through Voluntary REC Market • 5 PSUs have availed about 36,000 RECs through IEX to meet their respective CSR Obligation POSOCO (1603) REC (32800) SPMCIL (1334) IREDA (200) RINL (200) Voluntary REC Market potential (in Rs Cr) PAT Of ET 500 CSR Budge t 10 % @ 2% REC for 2009/10/11 326,637 REC Market Size 90% Floor Price Non Solar 39 Lakh No of REC @ 587 6,532 653 10% Solar 70,000 66 Voluntary REC market has potential to absorb over 50 % of REC issued in a year Free Participation for Voluntary Client at IEX To promote Voluntary purchase of RECs by individuals, corporates, PSUs, IEX has waived off registration fees from Voluntary Clients REC v/s setting up a RE Project for CSR Setting up a RE Project Buying RECs Feasibility Study PreDevelop ment Phase Approvals, No Objection Certificates from Nodal Agencies Huge Investments: Develop ment Phase Post Develop ment Phase • Land Acquisition • Technology • Rs 4.5 to 6.85 Crores per MW for a Wind Farm Evacuation of Power: PPAs/Third Party Arrangements RECs is not just a paper, it represents the power produced by a RE generator somewhere in the country No approvals required, anybody can buy More Flexibility: Based on CSR commitment buy 1 REC for Rs 1500 or 1 lakh for 15 Crore Why RECs for CSR • RECs have several advantages as an instrument: Measurable • RECs are measurable and it is easy to verify which specific project they are coming from Transparent • RECs are issued by government appointed agency, and the process and eligibility criterion are objective and transparent Effortless Cost effective • RECs are de-linked from physical power, which makes the consumption of green power easier to manage • Both Solar and Non Solar RECs currently traded at the floor price Buy RECs to go green Meet your CSR obligation Green Building/office/organisation Buy RECs equivalent to energy consumption for an event Make your home green with RECs equivalent to your electricity consumption Off set carbon footprints at individual level International Scenario Consumers demand ‘green’ products • As per Global Consumer Study 2012 by TNSGallup and Vestas on 24,000 consumers in 20 countries: – 74% consumers would have a better perception of a product if it were produced using renewable energy – In India, 74% consumers ready to pay mote for products produced using renewable energy. Enhanced efforts by companies globally to ‘Go Green’ INDIAN COMPANIES RANKING IN THE Newsweek Green Ranking 2014 Company Name Sector Rank Green Score Reliance Industries Energy 185 45.70% Tata Consultancy Services IT 212 42.00% Oil & Natural Gas Energy 217 41.70% IT 299 33.30% ITC Consumer 368 24.60% HDFC Bank Financials 380 22.80% Coal India Energy 445 13.30% Infosys Global Ranking Company Name Unilever L'Oreal Ericsson MetLife Siemens Johnson & Johnson National Grid Hewlett-Packard Samsung Electronics Rolls-Royce Holdings Apple Toyota Motor BP Microsoft Volkswagen Vodafone Group Colgate-Palmolive Oil & Natural Gas Google Sector Food & Beverages Cosmetics Information Technology Insurance Capital Goods Health Care Utilities, UK Information Technology Information Technology Capital Goods Information Technology Automobiles Energy Information Technology Automobiles Telecomm Consumer Staples Energy Information Technology * Source Newsweek 2014 Green Ranking Green Score 66.00% 65.50% 64.00% 62.20% 61.10% 60.10% 60.00% 59.60% 57.30% 56.90% 56.90% 54.90% 54.40% 52.80% 52.80% 49.20% 48.20% 41.70% 23.70% RECs are popular way to go green internationally Company Name Details Intel •Purchased 2.5 b kWh of RE and REC •88% of total electricity consumed Citi •Purchased over 56m kWh of RECs in 2008 HSBC •Purchased 276m kWh of RECs in US •Over 96% of North America electricity offset by RECs purchase Yahoo! •Purchased 1.6m kWh of RE & REC’s in 2010 •Uses 28% of RE power in its US operation Apple •11.5 m kWh of RE and REC purchased •98% of total US consumption About IEX Company Snapshot 96% Market Share ~80,000MWh average daily trade 3000+ Participants 2100+ Industries Transparency Liquidity Competition Key statistics: REC Market at IEX Portfolios State Utilities Generators Buyers Cleared Volume IEX Data as on 3rd July 2014 2100+ 15 States I 5 UTs 660 1663 >3 million RECs Highest: 3,69,053 RECs REC Market Share (as on 31st Mar’14) PXIL, 33% IEX, 67% IEX Market Segments Delivery-based Contracts Closed , Double-sided Auction 10-12 am bidding Each 15-min block , 0.1 MW min NOC required Day-Ahead Market since June,08 Day-Ahead Contingency – Another window 3-5pm Term-Ahead Market since Sep,09 Intra-Day - for the same day starting 2 pm Daily- for rolling seven days (delivery starting after 4 days) Weekly- for 1 week (Monday-Sunday) Renewable Energy Certificates since Feb,11 Green Attributes as Certificates Sellers : RE generators not under feed in tariffs Buyers: Obligated entities 1MWh equivalent to 1 REC Next… Energy Saving Certificates Auction Continuous www.iexindia.com