1. REC Mechanism: Opportunity for Investment in Wind Power Dr. Govind Bhagwatikar Siemens Limited: Wind Power Renewable Energy 2012 Wind Conference Pune, India 29 May 2012 Disclaimer: The views and opinions are of the presentator only.

2. REC The CERC issued REC regulations in January 2010. The key objective of the REC mechanism is to promote the development of renewable energy and facilitate its inter-state flow. This would enable the obligated entities (distribution utilities and open access customers) across states to meet their RPO targets as recommended by the NAPCC.

3. REC Mechanism Renewable Energy Generation Renewable Energy Generation Sale at Preferential / Feed-in Tariff Sale at Preferential / Feed-in Tariff Conventional Electricity Component (APPC) Conventional Electricity Component (APPC) REC Component REC Component Obligated Entities: DISCOMs, Open Access & Captive Consumers Obligated Entities: DISCOMs, Open Access & Captive Consumers Local / Host Distribution Company Local / Host Distribution Company Obligated Entities: DISCOMs, Open Access & Captive Consumers Obligated Entities: DISCOMs, Open Access & Captive Consumers The Obligated entities will have to replace approximately 5-7% of their total quantity of power consumed with power generated from renewable energy, or buy it on paper. *APPC – Av. Power Pooled/Procurement Cost

4. RPO in Various States

5. REC Accreditation The Process of getting the RECs: 1. Accreditation State Nodal Agency (SNA) 2. Registration Central Agency (NLDC) 3. Issuance Central Agency (NLDC) 4. Trading & redemption Power Exchange

6. Features of REC RE GENERATORs: Wind, Solar, Small Hydro, Bio-mass, Bio-fuel, Co- generation, Municipal Waste, Any GENERATOR approved by MNRE REC denomination: 1 MWh Categories: Solar & Non-solar Validity: 365 days after issuance Trading platform: Power Exchanges only Trading Calendar: Last Wednesday of the month Valid up to 2016-17

7. Eligibility Criteria for getting REC RE Generator not having any PPA at preferential tariff. RE Generator selling electricity to local/host distribution licensee at a price not exceeding the pooled cost of power purchase of such distribution licensee. OR RE Generator selling electricity to any other licensee or to an open access consumer at mutually agreed price or through power exchange at market determined price. RE Captive power producer (CPP) is eligible for the entire energy generated from such plant including self-consumption subject to condition that CPP has not availed any benefit in the form of concessional / promotional transmission or wheeling charges, banking facility benefit or waiver of electricity duty etc. Existing projects for which long-term PPAs are already in place will be allowed to participate in the REC scheme after the expiry of their existing PPAs.

8. REC Traded Price in FY 2011-12 REC Traded Price - INR 1.50 to Rs. 3.06 per unit Av. REC price was Rs. 2.30 During the year end – Jan- March, REC traded at higher price and volumes were increased. This was the first year of REC trading in power exchanges.

9. Case Study of 6 States Note: GBI not considered REC Floor Price – 1.50 REC Forbearance Price – 3.30 State Wind Tariff APCC 2011-12 3 Cases of REC PriceAPCC + REC CERC orderat 1.5at 2.25at 3at 1.5at 2.25at 3 Gujarat3.562.981.502.253.004.485.235.98 Maharashtra 5.37, 4.67, 3.97, 3.582.621.502.253.004.124.875.62 Andhra Pradesh3.502.501.502.253.004.004.755.50 Tamil Nadu3.392.691.502.253.004.194.945.69 Karanataka3.702.661.502.253.004.164.915.66 Rajastan 4.46, 4.692.601.502.253.004.104.855.60 Rs/kWh

10. Trend of APPC State Wind Tariff APPC 2009-10 APCC 2010-11 APCC 2011-12 APCC 2012-13 Ref:------- CERC Andhra Pradesh3.501.782.52 2.50 (2.00) Gujarat3.562.212.532.98 Karnataka3.701.852.612.662.73 Maharashtra 5.37, 4.7, 3.97, 3.582.432.512.62 Rajasthan4.46, 4.692.482.60 Tamil Nadu3.392.622.372.69

11. Dependability on Thermal Power India 65.34% In June 2011 Total Thermal Power116 GW Coal Based97 Gas Based18 Oil Based1

12. Coal Demand rising vis-à-vis its Price YoY. So the conventional electricity would be costly, as 60% power in India is generated by Coal-fired stations. Until 2005, the coal prices were upto Rs. 600 only. Coal India Limited fetched the price of Rs. 1800-2200 per ton in FY 2010-11 through auctions against the notified price of Rs. 800-1200 Cost of Generation

13. APPC APPC will vary with the prices of  Coal : Domestic / Imported  Gas  Diesel / Transportation  Water  Metal  Maintenance charges

14. Conclusion Due to dependability on coal, APPC will increase. This is in turn an opportunity for RE producers.