Solar REC remain unsold –where we are heading?
Yesterday the solar REC trading disappointed many investors as there was a supply of 5932 against a demand of 1479. The oversupply of REC brought the market clearance price at 9300 Rs/REC which is the floor price of solar REC. On one side there already about 100 MW solar capacity has come up under rec route at the same time there are no buyers for REC’s .This puts some of the following questions in the mind of investors as well as financiers.
- Will it remain like this in future?
- Is it because of lack of enforcement?
- Have the RPO compliance are being met primarily through bilateral PPA?
- Is it really costly affair for utilities for comply solar REC?
- Will the compliance will take place the end of financial year?
- What is the way out for government in case the utilities do not comply?
We have been debating in our blog on all these issues previously as well and still optimistic about solar projects viability under REC route.as there are low precedence’s we still do not have any direct answer to most of these questions. However we believe that RPO compliance from utilities and to open access consumers is like LIC policy which is to be bought at the end of financial year by the investors to save some taxes .While quarterly compliance of RPO is under consideration with the regulators it is expected that most of the REC will remain yearly traded until the last quarter of the financial year there is going to be aggressive trading only during the last quarter of 2013. Until then investors have to be keep fingers crossed and pressurize the regulator for better investment.
The 28th Trading Session of RECs concluded on 26th of June, 2013 and witnessed the clearing volume with an upward trend of 36.85% for Non-Solar RECs w.r.t. the last trading session. Whereas, the Solar REC market is down by 13.15% in clearing volume w.r.t. the last trading session. However, there is an unexpected fall in demand of Solar RECs seen in this trading session. Further, the Total Traded Volume worth Rs. 10.87 Crores for Non-Solar and Rs. 1.37 Crores for Solar were traded in this trading session.
The highlights of REC prices for Solar and Non-Solar are mentioned in the table where we can see the downward trend in Solar RECs. Price for Solar RECs has fallen down by 17.26% from the last trading session. In context with the investment in Solar Power Projects on REC mode, the revenue stream continues to be within the range of optimistic scenario. The numbers in Non-Solar segment have continued to generate positivity showing a growth in clearing volume by 36.85% w.r.t. the last month’s trading session. Few major obligated entities like government and private distribution companies from several states, namely, Maharashtra, Gujarat, Chhattisgarh and few of Union Territories are expected to participate for mitigation of their RPO in future.