BRIDGE TO INDIA's presentation at the MNRE Workshop on 'Challenges and issues of solar RPO compliance/RECs' on behalf of GIZ.

1. The International Experience:
REC Mechanism
Mohit Anand
BRIDGE TO INDIA
New Delhi, July 24th 2012
mohit.anand@bridgetoindia.com
www.bridgetoindia.com
01.08.2012
01.08.2012 Page 11
Seite

2. Japan, Australia and UK are countries with the most
robust REC mechanisms globally
Global Overview UK: Country
Solar Capacity Additions till 2011 with a
renewable
 Total number of Top 20 Countries Obligation
Certificate
countries with an 30000 since April 2002
RPS/Quota
policies: 71
25000 Japan: Country
has a New
 Total Number of Energy
Certificate
countries with a since April 2003
India:
20000 Country with
tradable REC:: 6 a Renewable
certificate
since 2010,
 Apart from Ghana 15000 with a solar
MW
India is the only specific carve
out
developing
country to have a 10000 Australia:
Country with a
tradable REC ; Renewable
Ghana does not 5000
Energy
Certificate
have an RPS since 2000 Cumulative
Capacity Addition
 India unlike Japan, 0 of Solar till 2011
Italy, UK and most (MW)
American states Capacity addition
has a solar carve of Solar in 2011
(MW)
out
Source: BRIDGE TO INDIA market analysis
EPIA; “Global Market Outlook for Photovoltaics till 2016”; May 2012
01.08.2012 Page 22
Seite

3. UK has a two year validity of Renewable Obligation
Certificates (ROCs) and a penalty re-cycling mechanism
 Policy formulated in 2000
RPO obligation  15.4% RPO till 2015-16
 20% renewable RPO till 2020
RPO  No solar specific targets in RPO enforcements
Solar targets
implementation  22GW of solar power by 2020
 Implementing body: OFGEMS
 Yearly penalties exist but are redistributed to
Compliance
compliant utilities in the proportion of their share
of total ROCs bought in the country
 Two ROCs for 1MWh solar produced
Price  Buyout price INR3,200/ROC (£36.99/MWh)
 (2010-11).
REC trading
Validity  2 years
 Data specific to solar ROCs is unavailable
Volumes
 Overall 24,884,608 ROCs issued in 2010-11
Source: BRIDGE TO INDIA market analysis
01.08.2012
01.08.2012 Page 33
Seite

4. Japan has defined penalties for non-compliance, quarterly
accounting for compliance and a carry over of obligations
 Policy formulated in 2003
RPO obligation  Target to install 16TWh of renewable energy by
2016
RPO Solar targets  No solar specific targets in RPO enforcements
implementation
 Penalty of up to JPY1m (INR 0.7m) on interim
and annual basis
Compliance
 There is also a quarterly compliance mechanism
 20% carry over of obligation is permissible
 Tradable New Energy Certificates (NEC) with a
Price
forbearance price of JPY11 (INR7.59)
REC trading Validity  2 years
Volumes  NA
Source: BRIDGE TO INDIA market analysis
01.08.2012
01.08.2012 Page 44
Seite

5. Australia has a differentiated non-compliance penalty
enforcement and allows re-cycling of penalties
 Policy formulated in 2000
RPO obligation
 45,000GWh (or 20%) RPO till 2020
Solar targets  No solar specific targets in RPO enforcements
RPO
implementation  Monetary as well as civil penalties for severe non-
compliance
Compliance  Severity based on reasons for non-compliance
 Re-cycling of penalties over three years
 Carrying forward a part of penalty to the next year
 Solar Credits REC multiplier of around 1.5 for
Price small solar installations
 INR1,378/STC1 and INR1,952/LGC2
REC trading
Validity  1 Year
Volumes  NA
1Small-scaletechnology certificate (STC) 2large-scale generation certificate; 1 LGC = 1MWh of renewable electricity generated above
the power station baseline; Based on BRIDGE TO INDIA market analysis
01.08.2012
01.08.2012 Page 55
Seite

6. India has separate solar specific obligations and the
states are charged with on-ground implementation
 Policy (NAPCC) formulated in 2008
RPO obligation
 15% renewable RPO till 2020
RPO
implementation Solar targets  3% solar RPO till 2020
 Compliance at forbearance price
Compliance
 States may implement further penalties
 Floor price – INR 9,300/MWh
Price  Forbearance price – INR 13,400/MWh
 Trading price (Recent) - INR13,000/MWh
REC trading
Validity  1 Year
Volumes  336 bids cleared on IEX
Source: BRIDGE TO INDIA market analysis
01.08.2012
01.08.2012 Page 66
Seite

7. Learnings: India needs to incorporate measures to improve RPO
enforcement
Examples Relevance for India
 Australia segregates  Enforcement measures can
Differential penalties for non-compliance reflect ground realities of
penalties by measuring the reasons utilities
for non compliance  Obligated entities are better
 The higher the risk the more place to reach full
stringent is the legal action compliance in stages
taken  Regulators advise on
regulations to ensure better
compliance
 Japan has a penalty of up to  Puts a value on potential
Specific Penalties costs for non compliance
JPY1m (INR690,000) for
non compliance  Gives certainty on
 Imposed on an interim and enforcement to project
annual basis investors
 Improves the bankability of
projects
Source: BRIDGE TO INDIA market analysis
01.08.2012
01.08.2012 Page 77
Seite

8. Learnings: India should incentivise RPO compliance through
REC and increase REC window
Examples Relevance for India
 UK has a buy out fund  Complying entities have a
Recycling where non complying potential income stream
penalties entities deposit a penalty  It provides partial off set to
 Complying entities can claim REC costs for utilities
it after they deposit the  Provides incentives for RPO
proportionate number of compliance through RECs
ROCs*
 Australia has a pay back
mechanism of penalties
charged in case of
compliance for 3 years
 Indian RECs have a validity
 Japan’s New Energy
Long term of a year
Certificates and UK’s issues
validity  This two year validity
ROCs have a validity of 2
increases the trading
years.
window for developers
 Mitigates risks from potential
demand and supply
Source: BRIDGE TO INDIA market analysis
*ROC: Renewable Obligation Certificate mismatches
01.08.2012
01.08.2012 Page 88
Seite

9. Learnings: India has to heighten the price stability and
increase bankability of RECs
Examples Relevance for India
 All other countries with an  Long term pricing increases
Long term REC mechanism are the bankability of a project in
pricing developed countries the absence of a strong
 They have robust market market mechanism
mechanisms in place .
 Japan checks the  Balances the number of
Quarterly compliance of its obligated REC purchases made
compliance entities on a quarterly basis through out the year
 Improves the price stability
of the REC
 Improves cash flow available
to developers
Source: BRIDGE TO INDIA market analysis
01.08.2012
01.08.2012 Page 99
Seite

10. Thank You
01.08.2012
01.08.2012 Seite 10
Page 10