Horizons V2 Issue 7

1. agneya Volume 2 Issue 7
HORIZONS
31 October, 2012
Sustainable Development is Serious Business
Energy charges
Over the past decade, organizations worldwide have faced uncertain market
(Paise/ unit)
conditions, declining natural resources, increasing cost of production and aggressive
800
competition. This, coupled with rigorous regulatory and policy changes has added to
700
the need for them to strengthen business foundations through sincere efforts at 600
understanding and implementing business sustainability. As understanding of 500
business impacts, risks and opportunities evolves over time, ways of doing business 400
are undergoing significant change. Companies are trying to enhance business 300
performance by addressing not only financial challenges, but also social, economic 200
and environmental factors. 100
0
Oct-06
Apr-07
Oct-07
Apr-08
Oct-08
Apr-09
Oct-09
Apr-10
Oct-10
Apr-11
Oct-11
Apr-12
Elements of Business
Sustainability Innovation Energy charges (Paise/ unit)
Capital Efficiency Linear (Energy charges
Risk Management (Paise/ unit))
Growth Enhancement
Resource efficiency Job Creation Source: MERC Tariff orders for MSEDCL
Green energy Skill Enhancement
Product stewardship Local Economic Impact
Improved technology Business Ethics
Limitations in domestic coal
supply, high costs of imported
coal and high technical and
Clean Water/Air Social Justice
commercial losses in the network
Emission Reduction Diversity contribute to increasing consumer
Biodiversity Human Rights
tariffs. For many industries, it is
Environmental Research Community Outreach
Recycling/Composting Labour Relations lack of power, not shortage that is
pinching – high cost diesel
generators are being used for
Environment Justice running operations instead of
Health and Safety
Climate Change backup.
Environment
Regulations

2. 2
Companies that have
invested in Renewable
Energy
20 MW, Wind,
Captive
consumption
8.7 MW, Wind; 0.4
MW Solar; Captive
consumption
Sustainable Growth – Focus on Renewable Energy
51 MW, Wind,
Captive Environment is a key focus area for companies planning for sustainable growth.
consumption Further, energy usage is one of their topmost concerns.
15 MW, Wind, Top 5 sustainability concerns for organizations
Captive
Energy Usage
consumption.
Recycling
Water Usage
Shortage of coal is estimated to
Employee well-being and benefit
continue in the near future as programs
environment clearance and land Community involvement/support
acquisition issues take time to
resolve. 0 5 10 15 20 25 30 35 40
Source: Evolution of sustainability practices, AICPA, CICA, CIMA
India’s coal inventory fell research study
drastically to 7.5 million tonnes – Renewable energy is not just a possible answer to climate change but more
13% lower than the previous importantly, is a valuable source of energy and increasingly, an important part of the
month and lowest in many years economy. In the recent American Presidential campaign debate for example,
even though there was a small President Obama reiterated support for production tax credit to wind energy as it
rise in the coal production by CIL. encourages investment in clean energy and creates jobs. RE is not without its
This shortage is a risk for downsides but it has many benefits to offer. Countries like India stand to gain a lot if
companies in terms of costs and they can contribute to all stages of the RE value chain – from R&D to manufacturing.
shortage of energy. To mitigate
Financing
this risk, many companies have
Difficult Times – A Test of Commitment
either invested in Renewable
Commercials
Energy or have contracted with a Commitment to sustainable development is tested under difficult economic
third party supplier so that they conditions. The Kyoto protocol was adopted in the 90s to reduce the impact of GHG
can fix part of their electricity cost emissions. Developed countries took up mandatory emission reduction targets under
with predictable increase in the this protocol. However, due to recent economic downturn, these countries are
future. Technology beginning to doubt their ability to meet their targets for 2016.
This approach also helps some The challenge is even greater for developing countries like India. The electricity
companies to meet mandatory sector contributes more than 35% of the total GHG emissions in India. Increasing
targets set by SEBI on maturity of wind power, falling cost of solar power and introduction of programs like
Environmental, Social and RPO and REC market have presented companies with an opportunity to take a step
Governance (ESG) disclosures. towards energy sustainability by shifting part / full consumption to renewable energy
without taking a hit to the bottom line.

3. agneya 3
REC Market in October 2012
REC Inventory
Clearing
REC Trade
Buy Bids Sell Bids Volume Traded Price
October 2012 REC Inventory Oct 2012
Rs. per REC
RE Newsletter
IEX 1,32,231 8,51,177 1,32,231 1,500
Non-Solar
2,22,700
PXIL 30,469 1,61,483 30,469 1,500
6,18,638
IEX 1,263 864 820 12,680
Solar
PXIL 2,100 1,012 971 12,500
12,98,258
9,02,320
RPO Compliance to drive market in short term
With supply of non-solar RECs outstripping demand by six times, the trading
session closed at the floor price. With inventory reaching a new high, next trading Opening Issued Redeemed Balance
session could be a good opportunity for Obligated Entities to fulfill their obligation
as prices may start rising from next year as the date for compliance for FY 2012-13 Source: REC Registry
comes closer and due to possible enforcement of RPO compliance backlog.
Solar RECs Record
Total IEX & PXIL Non-solar REC Trade
Highest Traded Volume
300
274 3,500
264
236 3,000 The October trading session saw
250 223
206 1,791 Solar RECs traded – the
200 2,500
200 highest volume so far. This can
172 169
158 2,000 be attributed mainly to the
150
112
increase in buy bids and sell bids
106 1,500
96 at PXIL which for the first time
100
71 1,000 overtook those of IEX. The total
50 500 value of trade was recorded at
Rs. 2.2 crores, also the highest
- -
so far.
IEX and PXIL Whole Volume Trade in Thousands Price at IEX (RHS) Price at PXIL (RHS)
Source: IEX & PXIL

4. 600 Capacity Registered, MW 3500
4
3000
State-wise Registered 500
2500
Capacity, April 2012 to 400 384
335
date 300 271
2000
250
1500
State MW 200 172 158 167
Tamil Nadu 149 1000
333 106 107
Maharashtra 283 93 73
100 62 500
Gujarat 140
Karnataka 127
Andhra Pradesh 71 0 0
Madhya Pradesh 34
Rajasthan 27
Uttar Pradesh 20
Uttarakhand 20
Bihar 12 Cum. Registered till Date(RHS) Registered
Chhattisgarh 12
Source: REC Registry
Punjab 11
Odisha 6
Himachal Pradesh 4
Total 1,100 In total, 167 MW of capacity was registered of which 42% was registered from
Andhra Pradesh in October. With this addition, the capacity registered in this
financial year has touched 1,100 MW.
Source-wise Registered
Capacity, April 2012 to
date
Source MW
Wind 810
Bio-fuel cogen 139
Biomass 127
Solar PV 18
Small Hydro 6
Total 1,100
agneya
Agneya is promoted by alumni of IIM Ahmedabad. We provide services in the following areas –
Renewable Energy – advising clients on the best possible portfolio of renewable energy (wind, solar, bio) across tariff regimes,
technology options, electricity sales structuring and availing incentives like REC and GBI.
Renewable Energy Regulations – advising clients on regulatory aspects of electricity market, options for realizing the maximum
value from their energy assets and minimizing costs related to regulatory compliance including addressing RPO.
Carbon & Energy – measuring carbon footprint, current/future energy profiling, and setting up energy management systems to
assess risks and opportunities related to energy security and climate change.
Sustainability – building robust long term foundations for business i.e. managing economic, environmental and social aspects of
business. These include establishing sustainability management framework and reporting as per GRI guidelines.
For further information on Renewable Energy Certificates or other services, please contact us at –
E-mail – rahul@agneya.in | Phone – +91-20-4120 3800, +91-88 06 07 07 83 | Website – www.agneya.in