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RPO & Solar REC s : from an investor’s perspective

RPO & Solar REC s : from an investor’s perspective. Date: March, 2012 Prepared for: RENERGY 2012. The Concept. Accelerated Depreciation TAX Benefits Subsidies / GBI Feed-in Tariff . Electricity. Total Cost of Production. Electricity Charge. Conventional Electricity. RE.

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RPO & Solar REC s : from an investor’s perspective

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  1. RPO & Solar RECs: from an investor’s perspective Date: March, 2012 Prepared for: RENERGY 2012

  2. The Concept • Accelerated Depreciation • TAX Benefits • Subsidies / GBI • Feed-in Tariff Electricity Total Cost of Production Electricity Charge Conventional Electricity RE ‘Green Premium’ A Market Based Instrument • Reduction in CO2, NO2, SoX etc. • Reduced SPM • No post-production trail Environmental Attributes • Issued to RE generators only • Obligatory Entities can buy RECs to fulfill their obligation • RECs a valid instrument for compliance REC REconnectEnergy Solutions (Pvt.) Ltd.

  3. Who gets RECs? Eligible if All Three conditions mentioned above are met REConnectEnergy Solutions (Pvt.) Ltd.

  4. Renewable Portfolio Obligation (RPO) • Mandatory purchase of certain % of RE by Distribution Licensees,OA Consumersand Captive Consumers(Obligatory Entities) • SERCs to specify RPOs in State • Separate RPO for Solarand Non-Solar Obligation can be fulfilled by: • By consumption of physical Renewable Energy or • By purchasing RECs (Solar & Non-Solar) Non-Compliance will lead to Penalty • Penalty to the tune of Maximum Price of RECs • Penalty under Section 142 of the Electricity Act-2003 The RPO REconnectEnergy Solutions (Pvt.) Ltd.

  5. CERC Regulation on REC: Key Provisions REC a valid instrument for RPO Compliance REC Denomination = 1 MWh (No minimum capacity*) Two categories of RECs: • Solar REC (For Solar Thermal and Solar PV) • Non-Solar RECs (For Wind, Small Hydro, Co-Gen, Biomass etc.) Floor Price and Forbearance Price for REC • Grid connectivity is must though REConnectEnergy Solutions (Pvt.) Ltd.

  6. Solar RPO Higher Incremental change in Solar RPO

  7. Demand for Solar Power / RECs? FY 2011-12 • FY 2012-13 Demand 2100 MW Supply 1200 MW? 1050 MW 500 MW REConnectEnergy Solutions (Pvt.) Ltd.

  8. A Case Study

  9. Challenges? Enforcement? Gap between NAPCC vs. Actual RPOs FY 2012-13 FY 2011-12 NAPCC 8% Actual 7% ~5.5% ~4.2% REConnectEnergy Solutions (Pvt.) Ltd.

  10. Renewable Energy Certificate (REC) in India Glimpse of REC Trade in India REConnect emerges as the largest REC Seller since Dec’11 REC Trade Session with market share of about 35% in total traded volume. REconnectEnergy Solutions (Pvt.) Ltd.

  11. Conclusion Pros • Potential rewards under REC mechanism • Early mover advantage • Innovative structuring offers exciting opportunities Cons • Regulatory roadblocks • Poor financial state of Indian Power sector REConnectEnergy Solutions (Pvt.) Ltd.

  12. Renewable Energy Certificate (REC) in India Subscribe to our monthly newsletter – OPEN ACCESS for up-to-date information on REC mechanism and developments around it (Subscription is FREE) Past newsletters are available at www.reconnectenergy.com More on REC / RPO To subscribe – Please mail to info@reconnectenergy.com Also try our online RPO Calculator at www.reconnectenergy.com REConnectEnergy Solutions (Pvt.) Ltd.

  13. Thank You! Questions? Bangalore: VishalPandya +91 80 – 6547 3383 Vishal.Pandya@reconnectenergy.com www.reconnectenergy.com

  14. Renewable Energy certificates – As per CERC Regulation

  15. Renewable Energy and Environmental Attributes • RECs are similar to carbon credits – they are tradable and will be available to RE power producers • They will be traded domestically • Electricity distributors and captive generators will have legally binding obligations to purchase RECs Electricity Energy Attributes Payment RE Producer Grid Environmental Attributes Traded in Global Market Carbon Credits + Payment Tradable in Indian Market REC’s REConnectEnergy Solutions (Pvt.) Ltd.

  16. Status of RPO Across India – As on 30 January, 2012

  17. Renewable Energy Certificate (REC) in India RPOs… contd. REconnectEnergy Solutions (Pvt.) Ltd.

  18. REC Mechanism – The Process REConnectEnergy Solutions (Pvt.) Ltd.

  19. Renewable Energy Certificate (REC) in India REC market – Key Drivers • Mandatory RPO across India • RPO to increase by 1% every year • High penalty for non-compliance • Deficit in physical RE purchase will reflect in form of REC demand • Result: Sizable Demand • CAGR for RE capacity addition in India is about 24% • RE generators can sell Green Energy OR • Unbundle Electricity and Green Attributes (REC) • Greater financial incentives for RE Generators* • Result: Good Supply Vibrant Market REconnectEnergy Solutions (Pvt.) Ltd.

  20. Renewable Energy Certificate (REC) in India About REConnect Focus Area Only REC Mechanism • USP Knowledge + Service • Strong Academics Columbia B-School, IIT Bombay, Symbiosis, IIT KGP, UPES • Much Stronger Experience IEX, JP Morgan,Asia Carbon,Gensol • Services Regulatory Advise, Liasoning,Trading,Strategy, Data Analytics REConnectEnergy Solutions (Pvt.) Ltd.

  21. Our Credentials Managing India’s LargestREC portfolio with Largest REC trading company First Company to: get accreditation in HP, TN, RJ, Kerala, MH, Physical Presence in 5 States • Clients Include: • India’s Largest RE IPP • India’s Largest C0-Gen • India’s Largest CPP • India’s Largest SHP under REC • India’s Smallest project under REC REC Projects over 14 States All Type Projects represents 1500 MW+ All Size REConnectEnergy Solutions (Pvt.) Ltd.

  22. Renewable Energy Certificate (REC) in India State of the art regulatory knowledge • Have actively contributed in RPO/REC regulation forming process at CERC, Rajasthan, Punjab, Karnataka, Tamil Nadu, Chhattisgarh, Meghalaya etc. Ability to execute complex and large projects • Many of our projects were first of its kind in respective states (e.g., first SHP in HP, first biomass project in RJ, first SHP in Kerala etc.) Faster and smoother execution with PAN India presence • Dedicated team to manage process at state level as well central level (have 4 member team at Delhi to look after registration and issuance alone) • This helps us execute projects seamlessly with minimal delay involved Many value added services along with trading services • Detailed trading strategy for each trade session, regulatory updates, regulatory analysis on REC related matters etc. Advantage REConnect REConnectEnergy Solutions (Pvt.) Ltd.

  23. Services by REConnect Assessment of RPO Liability RPO Compliance Strategy Trading & Portfolio Mgmt Compliance Procedures Mgmt • Detailed analysis of electricity consumption to determine RPO requirements • Assessment of state regulations • Track and update client about regulatory changes • Develop a detailed strategy for RPO compliance determine RPO requirements • Provide help in executing the RPO compliance strategy • Provide trading platform and services to purchase RECs, Green Power • Provide market intelligence and price expectations • Tracking compliance requirements • Operations support like filing returns in various states • Aiding in annual compliance audit WE HELP COMPANIES BUY/SELL RECs & PROMOTE GREEN ENERGY REConnectEnergy Solutions (Pvt.) Ltd.

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