REC Trading – May 2013 – Solar REC hits new lows

REC trading for the month of May 2013 concluded yesterday. In a sharp turn of fortunes, the Solar REC segment which has so far seemed resilient to the ill fortunes of the non-solar REC market has experienced a downward trend hitting its lowest discovered price per REC since the solar REC trading began.

 

 
 
 
Non-Solar RECs

The non-solar REC segment maintained its status quo. Though there hasn’t been significant movement, the total number of buy bids increased by 19% while the number of sell bids too increased by 11%. The supply glut is expected to continue in the non-solar REC segment with the number of RECs being injected into the market increasing at a similar or faster pace when compared to the number of RECs being bought out. The non-solar REC price continues to flatline, languishing at the base price of Rs. 1500 per REC both at the IEX and PXIL. Interestingly, PXIL seems to be gaining the upperhand over IEX as the preferred exchange for trading non-solar RECs with the traded volume in PXIL being about 46% higher than IEX.

Solar-RECs

The demand for solar-RECs too dropped significantly perhaps representing ominous signs for the future. The total number of buy bids (demand indicator) fell by about 76% while the total number of sell bids (supply indicator) grew by 36% compared to the levels seen last month. Total volume traded, as expected, fell by about 30%. Most worringly, the solar-REC price has reached new lows. The price discovered at IEX was Rs. 11,490 per REC while it was Rs. 10,990 in the PXIL trading session with the weighted average solar-REC price standing at Rs. 11,186.42. Both these prices are the lowest the respective exchanges have seen. As it stands though, there should be no cause for concern as even at the floor prices, REC based solar projects are viable especially considering the low tariffs being offered to developers across the country.

With the solar-REC supply expected to increase owing to numerous REC based power projects coming up in Rajasthan and other places, perhaps we might start witnessing the downward trend the non-solar REC segment saw unless some significant counter measures are taken….quickly.

The REC trading details for the previous months are available here and here.
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5 thoughts on “REC Trading – May 2013 – Solar REC hits new lows”

  1. amarjeet singh

    nothing surprising since the floor prices of both solar and non solar REC will reduce to below 50% of the current figures after next revision in 2017. But without demand their is risk for the market viability itself considering the supply surplus in non solar RECs. Have a question for RE Solve team with 24 trading days before expiry of the RECs considering a 760 days life of REC as per CERC what are the chances for a non solar REC seller to be able to sell in a market having a 1:69 ans 1:23 buyer to seller ratio at IEX and PXIL ?

    1. Amarjeet, the chances are very low. It is just as your numbers state. There is significant oversupply and so the chances of a particular REC being sold is very low especially considering the fact that all non-solar RECs are trading at the same price i.e. the floor price.

  2. Hi Amarjeet,
    Why do you think, the floor prices of REC will be reduced to below 50% of the current figures in the next revision in 2017.
    Thank you
    Amarnath

    1. Amarnath, the REC prices are fixed based on estimated capital cost requirements for the renewable energy projects. With the capital costs falling down rapidly since the control period began, we should see a significant reduction in the REC pricing too.

  3. amarjeet singh

    dear amarnath, just to quotes some figures to showcase that consider the recent APPC price for FY2013 by Uttrakhand regulator 1.98 per unit since CERC takes the lowest APPC which comes from majority hydro power generating states along with the recent tariff being quoted for solar power or preferential tariff also at 6.5 per unit and 8 per unit respectively. hence the difference among the 2(round of figure close to 1.98) and 8 per unit comes to 6 per unit at present with still 2 years pending before 2017. Hence the prices might reach around 5000 per REC for solar REC as floor price with forbearance at 8000 per REC. consider a 400 +/- variation in these prices. Incase of non-solar the prices are very close to each other for example consider APPC price of Maharashtra at 5.81 per unit and 3-4 being considered as thumb rule which will increasing upwards with growing role of imported coal and increase in gas prices. the non solar REC is dominated by wind as cheapest source at around 5-6 per unit across major wind energy states. Hence the chances are of floor price of 500 per REC and 1000 per REC as forbearance price. 200 +/- variation in these figures.

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