The document discusses renewable energy markets in Europe and the United States, noting that both regions have large compliance markets driven by renewable portfolio standards as well as smaller voluntary markets, and provides an overview of the developing renewable energy certificate market in India including trading volumes and registered capacity by state.

1. agneya Volume 2 Issue 4
HORIZONS
25 July, 2012
International Markets for Renewable Energy Compliance Vs Voluntary
Renewable Energy Certificates (RECs) were introduced in India in 2010 to promote RE Markets
Renewable Energy Sources and to support Renewable Purchase Obligation
mechanism. Since trading started in March 2011, the market has taken off well and
has matured over the period. Globally, Europe and United States are the biggest Comparative size of
markets of Renewable Energy. Compliance and
Voluntary RE segments
Europe India
Compliance market
The Renewable Purchase Standards in Europe are driven by commitment to EU
increase the share of Renewable Energy in the electricity mix. Obligated entities can US
fulfill obligations by purchasing Renewable Energy Certificates (RECs). Compliance
certificate schemes in Europe are national, with all countries except Italy having 0% 50% 100%
obligations on the percentage of electricity to be consumed from Renewable Energy
Compliance Voluntary
sources by electricity suppliers. Certificates are issued by Government designated
authorities. In UK, The Gas and Electricity Markets Authority is responsible for the Source: Hedenstroem, C. (2011).
implementation and administration of RPS on all licensed electricity suppliers. Size Highlights of EU policies for renewables
of Compliance certificate market for UK was £1.3 billion (i.e. around Rs. 8,500
Crores) for the year 2010-11 International REC markets are
mix of Compliance and Voluntary
Voluntary market segments. While Compliance is
Unlike the Compliance market, Voluntary market in Europe is driven by environment dominant segment, Voluntary
conscious electricity consumers. Voluntary schemes for Renewable Energy markets provide valuable support
Certificates in Europe started in 2001, after liberalization of the electricity sector. to the overall RE market.
Designated competent bodies supervise the issue of “Guarantees of Origin” (GO)
which specifies the source, time and place where the electricity is produced. The
Association of Issuing Bodies (AIB) was formed to standardize the certification

2. 2
Options for Buying
Renewable Energy
Share of Market Sector in
Total Voluntary Sales
(US), Million MWh
5.4
19.8 10.4 system across member States. There are currently 16 countries with a standardized
certificate system and issuing body as a member of AIB.
Utility Green Pricing
USA
Competitive Markets
Compliance market
Unbundled REC Markets Most States in US have independent targets for increasing the share of Renewable
Energy in the electricity mix. Thirty-nine of the fifty States have binding RPS in US.
Source: NREL, Oct 2011
Most of the States allow the use of RECs for fulfilling RPOs. Independent bodies
issue RECs which are independently audited by Utility Commissions. RECs have
associated attributes such as energy facility (e.g. wind or biomass), technology of
Various options are available to origin, and the generation date. Prices of REC vary as per attributes and issuing
consumers including residential body. Most States allow RECs generated in their respective States only for fulfilling
consumers to buy Renewable the RPS, with tracking systems to ensure that RECs are exhausted after use.
Energy:
Voluntary market
1) Utilities offering Green The drivers for this market are similar to European markets with environmental
Energy to electricity consciousness and growing awareness amongst the population being the key
consumers. Consumers can reasons. Buyers include both Residential and Business consumers. Voluntary RECs
pay premium for purchasing are issued and marketed by different issuing bodies. Further, programs such as
Renewable Energy for either Green-e Energy have been developed to ensure that no double selling of voluntary
full or partial consumption of certificates occurs. The size of the Voluntary market in US is estimated to be $168 -
Renewable Energy. 285 million.
2) Consumers can choose to
Energy Markets in Europe and US (TWh/annum)
switch electricity Financing if
supplier Source:
their current provider does EU 3300 350 300 Hedenstroem,
not offer green energy option. 3950
C. (2011).
US 55 35
Commercials
Electricity supplier can either Highlights of
EU policies for
purchase RECs or buy Conventional energy market Compliance RE market Voluntary RE market
renewables
Renewable energy from
Generators
Technology
3) Consumers can buy green India – An evolving framework for REC markets
energy from the market The REC market in India is new, with pricing capped by the government. The role of
through companies, brokers the Government in pricing, however, is expected to reduce as the market matures.
selling unbundled RECs Compliance REC markets are still in the process of stabilizing – the process for
registration needs to be streamlined in order to make it easier for larger number of
buyers/sellers to participate. Introduction of Voluntary market mechanism meanwhile,
has the potential of further boosting REC market in the country.

3. agneya 3
REC Market in July 2012
REC Inventory
REC Trade Clearing Price
Buy Bids Sell Bids Volume Traded
July 2012 Rs. per REC
REC Inventory July 2012
IEX 149,628 435,348 147,369 2,000
Non-Solar
PXIL 11,400 32,194 10,851 2,202
IEX 8,554 419 93 12,800
Solar 3,33,969 1,58,220
PXIL 200 130 86 12,800
3,49,526
1,73,777
Lean trading session for RECs
After strong showing in the first three trading sessions of this financial year, the REC
market slowed down in July. The first quarter was expected to present Obligated
Entities with the opportunity to fulfill their commitments at a lower price as the market
tends to pick up gradually after April. With the initial rush for purchases over, the Source: REC Registry
market is settling down for a lean period. It must be noted however, that REC price of
Rs. 2000 in July is still 29% higher than same session last year, even after lowering
of forbearance price from Rs. 3900 to Rs. 3300.
Opportunity for
250 236 3,500 Obligated Entities
206 200 3,000
200 With highest ever balance of
172 169
158 2,500 RECs accumulated with
150
2,000
developers and Wind season on,
106 112 it is expected that supply will
96 1,500
100 exceed demand by a wide
71
1,000 margin in next trading session.
46
50
25
Hence, it is a good opportunity
19 500
for Obligated Entities to fulfill
- - RPO by buying RECs at lower
July
2011
Aug
2011
Sept
2011
Oct 2011 Nov
2011
Dec
2011
Jan 2012 Feb
2012
Mar
2012
April
2012
May
2012
June
2012
July
2012
prices.
IEX and PXIL Whole Volume Trade in Thousands Price at IEX (RHS) Price at PXIL (RHS)

4. Capacity Registered, MW
600 3000
4
State-wise Registered 500 2500
Capacity, April 2012 to 400 384
335
2000
date 300 273 287 271 1500
172 172
State MW200 149 158 1000
113 106
Tamil Nadu 257 93 73
Maharashtra 197100 500
Gujarat 106
Karnataka 69 0 0
Madhya Pradesh 21
Uttar Pradesh 13
Chhattisgarh 12
Rajasthan 8
Himachal Pradesh 3
Punjab 0 Cum. Registered till Date(RHS) Registered
Uttarakhand 0
Kerala 0
J&K 0 Although trade value in this session fell by 44% of last trading session to
Haryana 0 Rs.31.86 Crore, still this is 14 times of the trade value during July last year.
Total 686
Source-wise Registered
Capacity, April 2012 to
date
Source MW
Wind 532
Biomass 82
Bio-fuel cogen 50
Solar PV 18
Small Hydro 4
Total 686
agneya
Agneya is promoted by alumni of IIM Ahmedabad and IIM Bangalore. We provide services in the following areas –
Renewable Energy – advising clients on the best possible portfolio of renewable energy (wind, solar, bio) across tariff regimes,
technology options, electricity sales structuring and availing incentives like REC and GBI.
Renewable Energy Regulations – advising clients on regulatory aspects of electricity market, options for realizing the maximum
value from their energy assets and minimizing costs related to regulatory compliance including addressing RPO.
Carbon & Energy – measuring carbon footprint, current/future energy profiling, and setting up energy management systems to
assess risks and opportunities related to energy security and climate change.
Sustainability – building robust long term foundations for business i.e. managing economic, environmental and social aspects of
business. These include establishing sustainability management framework and reporting as per GRI guidelines.
For further information on Renewable Energy Certificates or other services, please contact us at –
E-mail – rahul@agneya.in | Phone – +91-20-41203800, +91-88 06 07 07 83 | Website – www.agneya.in