RECs - Renewable Energy India Expo

Report
Renewable Energy 2012 Wind Conference
Innovative trends to increase project profitability
per kwh
May 2012
Strictly private and confidential
REC, GBI and CDM can lead to significant upsides
Equity IRR Impact of REC, GBI and
CDM
Tariff Impact of REC, GBI and CDM
5.0
20
1.7
2.6
0.3
4.0
15
0.18
1.5
3.0
8.6
20.7
10
1.0
7.8
2.5
2
1)
REC : Rs. 1.5 /u till FY17 and Rs. 1/u post FY17
2)
CDM : 3.5 euro/CER is sale price; revenues from second year
Total
CDM
GBI
Total
CDM
GBI
REC
Base
Case
Key Assumptions:
REC
0.0
0
APPC
5
4.5
2.0
REC market stabilizing (Non-solar), but
limited government utilities participation
3500
2891
2818
2950
2710
2500
3051
2907
200,000
2237
2000
150,000
1789
1500
1500
1505
1554
1500
100,000
MCV (RECs)
MCP (INR/REC)
3000
250,000
3065
1000
50,000
500
0
MCP (INR/REC)
MCV (RECs)
0
Mar2011
2818
424
Source: www.recregistryindia.in
3
Apr2011
1500
260
May2011
1500
18,502
JunAugJul-2011
2011
2011
1505
1554
1789
16,385 18,568 25,096
Sep2011
2237
46,362
MCP (INR/REC)
OctNovDecJanFebMar2011
2011
2011
2012
2012
2012
2710
2891
2950
3051
3065
2907
95,504 105,527 111,621 171,524 206,188 199,737
MCV (RECs)
1)
REC Sale Price stabilised over second half of FY12
2)
Buy bids peaked in Jan-2012; modest decline in Feb & Mar 2012
3)
For FY12, the closing balance of REC inventory was 38545 RECs against annual redemption volume of 1 million RECs
4)
Most State Government owned utilities have not even opened trading account
RECs: An upside
•
REC option for power sale has its own risk, but might turn out to be
more profitable than Feed-in tariff (FIT)
– It might be possible that REC market may be the only option for selling Renewable
and FIT is not available or vice-versa

4
Key Risk of REC is liquidity and if Discoms don’t participate and RE
Generator’s RECs increases , without a market maker, it will become
difficult to sell
GBI : IPP’s taking over AD investors
1
Installed Capacity Addition in MW

Growth was largely on
account of accelerated
depreciation linked tax
benefit market

Growth in last two
years is driven by
Independent
Power
Producers (IPPs)
3500
2
3000
1
2500
2350
2000
1748
1778
2
1584
1565
1500
1484
1115
1000
500
3000
608
285
239
0
FY02 FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12

AD in FY12 might be
approximately
1500
MW out of 3000 MW

The pace at which IPP
segment is growing
might replace atleast
1000 MW out of 1500
MW of AD, making
FY13 end at 2500 MW
GBI Registered Projects
(MW)
1000
867
800
600
400
449
200
0
2010
Source : MNRE
5
2011
GBI: An upside
•
We understand that MNRE has been supporting GBI extension and
decision is pending with Ministry of Finance
– Current GBI benefit might get extended to 4000 MW

Key risks are some of the SERCs are asking for GBI benefits to be
reimbursed to the Utilities (e.g. RERC latest order)
– This completely negates the objectives of MNRE to incentivize renewable
6
CDM: An upside
•
Inspite of lower CER prices, it is a significant upside
– CER Prices are expected to go up with recovery of demand in European Unions

Key issues in CER
– One should target to get the CDM registration done by end of 2012, as EU, has
extended certain regulation to bar applicability of CERs generating from project
registered beyond 2012 from +5 nations in compliance of emission reduction targets,
increases the risk of commercialization of such projects
– Huge back lock at MoEF for Host Country Approval
7
Summary

Irrespective of key risk and uncertainty associated with each of the options, growth
of Wind Industry is dependent on these upsides

In Karnataka REC or TPS/Group Captive is the only viable option to invest, with FIT
so low

In Gujarat REC is the only option, unless GERC revises FIT tariff to a comfortable
level

In Rajasthan, with recent uncertainties on signing PPA, many investors are looking
at RECs

Currently FIT in most of the States other than Maharashtra, Orissa and to some
extent Rajasthan are so low that it is impossible for making a project viable at FIT
and hence one has to depend on one of these upsides or try for Group Captive or
Third Party Sale structure
8
THANK YOU
Parag Sharma
Chief Operating Officer
ReNew Wind Power
M: 9810052210; [email protected]
9

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