Power Exchange bets on renewable energy; to focus on revival of REC market

Power Exchange India Limited (PXIL), the power trading platform of National Stock Exchange (NSE), is putting its bets on renewable energy after its re-launch. It will focus on reviving the Renewable Energy Certificates (REC) market which has been facing tepid interest from the market.
 

PXIL faced financial crisis in 2017 when its net worth eroded and promoters of NSE and NCDEX wanted to shut it down prior to NSE's proposed initial public offering (IPO).

“Promoters have been keen that they develop different market places. The catch-22 situation was erosion of net worth and finding external financing which was difficult. But FY18 onwards, PXIL has been making profit. The main reason for revival was shifting focus on our strength areas,” Prabhjit Kumar Sarkar, managing director of PXIL told Business Standard. 

Sarkar said PXIL’s emphasis primarily has been on term-ahead market (TAM) and RECs in the in last two years. “And now we have enough liquidity to also have day-ahead spot market on a large scale,” he added. 
 

Power trading market has two platforms in India - PXIL and India Energy Exchange (IEX). IEX holds 95 per cent of the day-ahead spot power trading market. PXIL holds 40 per cent market share in REC and term-ahead market (TAM).
 

REC was launched in 2010 as a means for companies and states to purchase renewable energy without physically setting up renewable power plants. Project developer can sell the energy produced as REC. One REC represents 1mw-hour of power produced from a renewable energy source and is tradable at power exchanges. It is divided into Solar REC and non-solar REC.
 

It is also a means to fulfill Renewable Purchase Obligation (RPO) notified under the National Tariff Policy, it is obligatory for state-owned distribution companies, open-access consumers and captive power producers to meet part of their energy needs through green energy. 
 

Sarkar, however, agrees that RECs still remain a difficult territory. Lack of interest from the market and nil buyers crashed the REC market in 2017 with more than 10 million unsold RECs. Sarkar said since then the number of RECs available for sale has come down on trading platforms, but that has reduced the size of market.
 

In the current financial year, 221,000 solar RECs and 1.35 million non-solar RECs have been traded. The last closing price for solar REC was Rs 2,400 a REC (Rs 2.4 per kwh of power generated) and for non-solar it was Rs 1,850 a REC (Rs 1.85 per kwh). This is lower than the prevailing price of grid-connected solar and wind power projects.
 

“In the last few months, number of REC available has depleted significantly. But the buyers have increased. These are the states which want to fulfill their renewable purchase obligation (RPO),” said Sarkar. He said REC favours a certain section of consumers who cannot set up renewable projects but have green obligation. These could be industrial clusters and commercial centres, etc.
 

He said REC mechanism works only when project developers sell at price lower than the long-term price of solar power projects. “Much fewer numbers of developers are coming through the REC route,” said Sarkar.
 

He said the company is preparing a white paper to present to the Central Electricity Regulatory Commission that different type of contracts and products, apart from RECs, should be allowed in the renewable energy market. 
 

Apart from NSE and NCDEX, the companies that form part of the PXIL board are GMR Energy, Tata Power, and JSW Energy, state-owned Power Finance Corporation, Gujarat Urja Vikas Nigam Limited (GUVNL) and West Bengal State Electricity Distribution Company.