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Horizons V2 Issue 7
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Sustainable Development is Serious Business Over the past decade, organizations worldwide have faced uncertain market
conditions, declining natural resources, increasing cost of production and aggressive
competition. This, coupled with rigorous regulatory and policy changes has added to
the need for them to strengthen business foundations through sincere efforts at
understanding and implementing business sustainability. As understanding of
business impacts, risks and opportunities evolves over time, ways of doing business
are undergoing significant change. Companies are trying to enhance business
performance by addressing not only financial challenges, but also social, economic
and environmental factors.
Volume 2 Issue 7
HORIZONS
agneya
31 October, 2012
Source: MERC Tariff orders for MSEDCL
Limitations in domestic coal
supply, high costs of imported
coal and high technical and
commercial losses in the network
contribute to increasing consumer
tariffs. For many industries, it is
lack of power, not shortage that is
pinching – high cost diesel
generators are being used for
running operations instead of
backup.
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Energy charges (Paise/ unit)
Energy charges (Paise/ unit)
Linear (Energy charges (Paise/ unit))
Innovation
Capital Efficiency
Risk Management
Growth Enhancement
Social Justice
Diversity
Human Rights
Community Outreach
Labour Relations
Clean Water/Air
Emission Reduction
Biodiversity
Environmental Research
Recycling/Composting
Job Creation
Skill Enhancement
Local Economic Impact
Business Ethics
Resource efficiency
Green energy
Product stewardship
Improved technology
Environment Justice
Health and Safety
Climate Change
Environment
Regulations
Elements of Business
Sustainability
Sustainable Growth – Focus on Renewable Energy
Environment is a key focus area for companies planning for sustainable growth.
Further, energy usage is one of their topmost concerns.
2
Financing
Commercials
Technology
Renewable energy is not just a possible answer to climate change but more
importantly, is a valuable source of energy and increasingly, an important part of the
economy. In the recent American Presidential campaign debate for example,
President Obama reiterated support for production tax credit to wind energy as it
encourages investment in clean energy and creates jobs. RE is not without its
downsides but it has many benefits to offer. Countries like India stand to gain a lot if
they can contribute to all stages of the RE value chain – from R&D to manufacturing.
Difficult Times – A Test of Commitment
Commitment to sustainable development is tested under difficult economic
conditions. The Kyoto protocol was adopted in the 90s to reduce the impact of GHG
emissions. Developed countries took up mandatory emission reduction targets under
this protocol. However, due to recent economic downturn, these countries are
beginning to doubt their ability to meet their targets for 2016.
The challenge is even greater for developing countries like India. The electricity
sector contributes more than 35% of the total GHG emissions in India. Increasing
maturity of wind power, falling cost of solar power and introduction of programs like
RPO and REC market have presented companies with an opportunity to take a step
towards energy sustainability by shifting part / full consumption to renewable energy
without taking a hit to the bottom line.
Companies that have
invested in Renewable
Energy
Shortage of coal is estimated to
continue in the near future as
environment clearance and land
acquisition issues take time to
resolve.
India’s coal inventory fell
drastically to 7.5 million tonnes –
13% lower than the previous
month and lowest in many years
even though there was a small
rise in the coal production by CIL.
This shortage is a risk for
companies in terms of costs and
shortage of energy. To mitigate
this risk, many companies have
either invested in Renewable
Energy or have contracted with a
third party supplier so that they
can fix part of their electricity cost
with predictable increase in the
future.
This approach also helps some
companies to meet mandatory
targets set by SEBI on
Environmental, Social and
Governance (ESG) disclosures.
0 5 10 15 20 25 30 35 40
Community involvement/support
Employee well-being and benefit programs
Water Usage
Recycling
Energy Usage
Top 5 sustainability concerns for organizations
Source: Evolution of sustainability practices, AICPA, CICA, CIMA
research study
20 MW, Wind,
Captive
consumption
8.7 MW, Wind; 0.4
MW Solar; Captive
consumption
51 MW, Wind,
Captive
consumption
15 MW, Wind,
Captive
consumption.
REC Trade October 2012
Buy Bids Sell Bids Volume Traded Clearing
Price Rs. per REC
Non-Solar
IEX 1,32,231 8,51,177 1,32,231 1,500
PXIL 30,469 1,61,483 30,469 1,500
Solar
IEX 1,263 864 820 12,680
PXIL 2,100 1,012 971 12,500
96 106 112
172
206 200
71
169
236
158
274 264
223
-
500
1,000
1,500
2,000
2,500
3,000
3,500
-
50
100
150
200
250
300
Total IEX & PXIL Non-solar REC Trade
IEX and PXIL Whole Volume Trade in Thousands Price at IEX (RHS) Price at PXIL (RHS)
3
REC Market in October 2012
RE Newsletter
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
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
comes closer and due to possible enforcement of RPO compliance backlog.
REC Inventory
Source: REC Registry
Solar RECs Record
Highest Traded Volume
The October trading session saw
1,791 Solar RECs traded – the
highest volume so far. This can
be attributed mainly to the
increase in buy bids and sell bids
at PXIL which for the first time
overtook those of IEX. The total
value of trade was recorded at
Rs. 2.2 crores, also the highest
so far.
9,02,320
12,98,258
6,18,638
2,22,700
Opening Issued Redeemed Balance
REC Inventory Oct 2012
agneya
Source: IEX & PXIL
172
384
271
149
93
158
73
335
106
250
62
107
167
0
500
1000
1500
2000
2500
3000
3500
0
100
200
300
400
500
600 Capacity Registered, MW
Cum. Registered till Date(RHS) Registered
State-wise Registered
Capacity, April 2012 to
date
State MW Tamil Nadu 333 Maharashtra 283 Gujarat 140 Karnataka 127 Andhra Pradesh 71 Madhya Pradesh 34 Rajasthan 27 Uttar Pradesh 20 Uttarakhand 20 Bihar 12 Chhattisgarh 12 Punjab 11 Odisha 6 Himachal Pradesh 4 Total 1,100
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
4
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.
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 – [email protected] | Phone – +91-20-4120 3800, +91-88 06 07 07 83 | Website – www.agneya.in
Source: REC Registry