1. General Carbon Newsletter
ENERGY & ENVIRONMENTAL COMMODITIES NEWSLETTER NOVEMBER 2011, ISSUE:06
Point of View
REC PROJECT HIGHLIGHTS
(as on 1st Dec 2011)
As the REC market completes one year, observers are
eager to quote volume numbers to announce the success of Accredited Projects: 304
the market. While REC has no doubt taken off with (1937.138MW)
renewable power generators clearly spending more time to Registered Projects: 249
analyse the options, participants are keen to see year-end (1619.37MW)
accounting of RPO obligations. The enforcement of RPO
REC Issuance:
through purchase of RECs and penalties on shortfall for
REC Issued: 4,59,285
captive consumers, open access consumers and DICOMs REC Redeemed: 3,26,628
will be eagerly followed. Closing Balance: 1,32,657
(Source: Recregistry, India)
While REC markets are growing exponentially, CDM and
CER prices are falling off a cliff. With current CER prices at
REC PRICE WATCH
EUR 6, there is a sense of doom in the market. There is low
Nov 2011 Session
(or rather no) expectation of a positive outcome from the
talks at Durban and little in terms of positive news flow from IEX: Price (Volume)
Europe to suggest a price recovery any time soon. The Non solar -INR 2,900 (96,153)
domestic power market witnessed significant volatility due Solar - (Not traded)
to lack of availability of coal and natural gas, which affected
price and volumes on both exchanges. Through significant PXIL: Price (Volume)
steps taken to restore coal availability, prices seem to be Non solar -INR 2,800 (9,373)
recovering, while long terms structural issues have been Solar - (Not traded)
brought to the forefront by this short term challenge.
Significant coverage of the dire financial situation of state CER PRICE WATCH
electricity boards have been highlighted in the media. While 30 November 2011
reform continues to be buzzword, no real on-ground action
BlueNext Daily Spot: Price
was witnessed in the energy and environmental commodity
(Volume)
space during the month.
€ 5.70 (1,05,000)
Best,
Satish Kashyap

2. Power Price Trend Energy Market News
Finally, order compelling
October saw high volatility at day-ahead power market with open access in power
power prices moving northwards due to the staggering Ministry tells states,
shortage of coal while resulting in lower volumes. (More regulators & discoms to
coverage in our article below). In November the average implement 2003 law
trading price of power on exchange was around ₹4 per unit. provision. The Union power
ministry has told all state
governments, power
regulators and distribution
utilities to delay no more in
implementing the open
access provisions of the
Electricity Act, 2003.
Second set of reforms
being prepared to unlock
power sector
Struggling to meet the 11th
Plan revised target of 62,000
MW of capacity addition from
78,000 MW, due to shortage
of coal, non-availability of
gas, high cost of imported
coal and tardy pace of
various power projects, the
United Progressive Alliance-II
government is preparing to
unleash a second set of
power sector reforms,
including open access to
consumers to choose their
(Source: PXIL & IEX websites)
electricity supplier and
restructuring of power utilities
of seven major States —
REC Price Trend including Uttar Pradesh and
Tamil Nadu.
The REC were traded at ₹2800 on PXIL and ₹2900 on IEX in
the November trading session. The REC issuance by NLDC Wind power capacity likely
surpassed over a lakh RECs for consecutively in November, to rise 5,000 MW in 12th
which led to increased availability of RECs on exchanges. A plan
The government plans to add
total of 1,05,527 RECs were traded on both the exchanges.
5,000 MW of capacity in the
12th Five-Year Plan by
encouraging retrofitting of

3. older wind power farms, and
tightening existing rules that
let promoters enjoy tax
breaks even without
producing electricity. This
5,000 MW target is in addition
to the 15,000 MW planned
through new projects.
State power distribution
cos stare at steep losses;
may be forced to buy power
from short-term markets
State-run power distribution
companies are staring at
steep losses in the run-up to
assembly polls in key states
next year, ahead of which the
state governments will seek
continuous electricity supply
to woo voters. This will
accentuate the losses of the
discoms that paid 14 for
every unit of purchase while
(Source: PXIL & IEX websites)
selling it at Rs 14 during the
coal crisis in October. The
Coal shortage shot up power prices cumulative losses of the
discoms are expected to
Indian power sector could see tougher times ahead due to swell from Rs 80,000 crore to
depleting inventory of coal, forcing several power stations to Rs 1,15,000 crore within
operate at extremely low stock levels. As many as 29 power three years.
stations of the 80 coal based power projects in India are
TN: Power consumers may
currently operating with less than 4 days coal stock and 44
have to pay up to 110%
with less than 7 days coal stock. (Source- The Economic
more
Times - 27 Oct, 2011). The ongoing crisis due to non
availability of coal has clearly brought out the stark reality of In the tariff revision
how vulnerable the economy is in the infrastructure front, application filed with the
especially availability of power. Tamil Nadu Electricity
Regulatory Commission
The crisis has even caused short term power prices and (TNERC) on Thursday, the
exchange volume go haywire. The prices in the day ahead TANGEDCO has proposed a
hike of 74 per cent for people
market increased to ₹5 per unit from ₹2.75 per unit on the
consuming up to 200 units,
power exchanges. The Indian Energy Exchange (IEX)
94 per cent for those
witnessed reduction in daily volume to 32 million units from
consuming up to 500 units
over 40 million units. At the Power Exchange India Ltd
and 113 per cent for those
(PXIL), the daily volumes have dipped to 2.9 million units

4. from 7 million units. consuming above 500 units.
Rays of hope National power grid to be
After a shortage of coal supply earlier in the month, the ready by 2014
Ministry of Coal has helped ensure that power plants receive
In a bid to improve
coal on a priority basis. On October 24, 2011, a total of 181
transmission of power across
coal rakes were dispatched, out of which 147 rakes went to
the power sector. Each rake can carry 3500 tonnes of coal. the country, India plans to
connect all regional grids into
a national grid by 2014
REC/RPO– First year so far so good but...
As the REC mechanism completes its first year, the market
As defaults mount, power
has begun to see increased participation from generators, firms warn of blackouts
open access consumers and DISCOMs. REC trading has Money due to state-run
commenced and shown exponential growth, however, the utilities after 60 days of bill
year ending period and account of RPO will be the real test of submission amounts to Rs.
the market.
5,347.78 crore as of 24
Some pending action points are summarized below October, according to
government data
 Most of the states in India (except Andhra Pradesh, West
Bengal, etc.) have come out with regulations specifying Dispatch of coal to power
the RPO targets and also specifying the entities which
firms a priority:Govt to coal
are obligated.
miners
 Many states have waived RPO targets for certain Power plants usually
categories of captive and open access consumers from maintain 10-15 days of coal
fulfilling the targets. In few states (like Gujarat, stocks. The situation is
Maharashtra, Karnataka, etc) a capacity limit is placed
considered critical if the
(e.g. 1MW, 5MW, etc).
reserves fall below seven
 Clarity on treatment of electricity duty days’ generation
exemptions/waivers for generators will expand the supply requirement
of REC generators and develop a uniform market
MERC rejects JSW Energy's
 Clarity on RPO applicability for captive consumers of
plea to revise power tariffs
renewable energy is still awaited (esp. in Tamil Nadu),
Regulatory authorities have
various associations have expressed differing views
rejected JSW Energy's plea to
o The captive renewable generation which is being revise power tariffs because
wheeled through grid (using preferential of difficulty in procuring fuel
wheeling) should be treated as renewable power from Indonesia, a decision
consumed (even though they are not entitiled to
that analysts said was a
REC) by the user. Hence, it should help
setback for other companies

5. consumer fulfil part of their RPO obligation. seeking higher electricity
rates on similar grounds.
o The captive renewable generation which is being
wheeled through grid is obtaining preferential
wheeling and therefore this should be treated as Power tariffs should be
renewable power for the DISCOM providing the revised annually
preferential wheeling. Hence, the renewable State regulators should
power can by considered by DISCOM to fulfil devise a formula revising
part of its RPO obligation.
tariffs in line with changes in
o As wheeling benefit has been provided to the prices of power purchase and
consumer, the consumer is assumed to be fuel , says ATE
procuring non renewable power through open
access and will therefore have to comply with
RPO obligations. Hence, consumer will have to
EDITOR
purchase RECs to the extent of his RPO
obligation for the power wheeled. Rameez Shaikh,
rameez.shaikh@general-
 The APPC structure for signing PPA for RE projects is carbon.com
finalised in very few states. Some DISCOMs have
already expressed lack of willingness to sign APPC GERERAL CARBON
based PPAs even though APPC has been announced.
 The REC mechanism seems to have come up with
challenges that are state specific which has halted the
growth of the mechanism to about six states. The
accreditation processing has started in only 10 states, This newsletter is brought to you
while participation from other states including Karnataka,
by General Carbon. Contact
MP, AP, Kerala, etc is still awaited.
gcnews@general-carbon.com if
While the upward movement of REC prices instils confidence you have any queries or
among project developers resolution of the numerous comments or wish to contribute
challenges related to market are needed to evolve REC into news and updates. We welcome
a long term success story. your suggestions and
contributions.
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6. COP17/CMP Begins: Kyoto Future is sealed? electricity markets, renewable
Stress rises as the future of Kyoto Protocol, which expires at energy, energy efficiency,
the end of next year, Green Climate Fund, Trade barriers and sustainability assets, carbon
climate change, Euro zone Crisis markets and carbon offset
project development.
China, Japan Clash With EU Over Aviation CO2 Curbs at
Summit
European Union plans to impose curbs on carbon-dioxide
emissions by international airlines as of 2012 drew fire from
countries including China, Venezuela and Japan, marking a
new stumbling block at the climate summit this week.
Boost for Japan's CO2 trading plan: will replace Kyoto?
Proposed scheme is being promoted as more flexible than
the emissions trading system currently being operated by
the United Nations, under the terms of the Kyoto Protocol.
Australia's plan to price carbon emissions
Will force Top 500 polluting companies to pay a A$24
($22.90) a ton price for carbon emissions from mid 2012