RECs as a tool to fulfill CSR mandate 07 th August,2014 New Delhi

1. RECs as a tool to fulfill CSR mandate07th August,2014 New Delhi Shruti Bhatia Vice President-Policy and Communication

2. In this presentation

4. What are RECs?Separating green attribute from electricity • Issues • Uneven RE resource distribution • Schedulability • Uncertainty • Transmission Loss & Charge Bundled Green Power Seller (RE power) Buyer (RPO Compliance) Un-bundled Green Power Electricity • Solution • No geographic barriers • Reduced transaction cost • More shelf life: Flexibility in meeting the RPO Seller (RE power) REC(Green Attributes) Buyer (RPO Compliance) REC(Green Attributes) Discoms, Power exchanges , Bilateral Contracts Electricity

5. Evolution of REC Market in India 10 July 2013 : 2nd Amendment to CERCs REC Regulation proposes clarification on various issues

6. Salient Features of REC Mechanism *Reference :CERC in its order dated 23rd August, 2011 revised the floor & forbearance price for the period April, 2012 to March,2017

7. REC Market Participants: Sellers/Eligible Entity

8. REC Market Participants : Buyers

9. REC Mechanism

10. Trading at IEX Trading Day Last Wednesday of every Month Market Clearing Closed Double sided auction Trading Time 1300-1500 Hrs By 1530 Hrs Verification by Central agency for Valid REC by cleared seller at IEX By 1600 Hrs Central agency confirms REC By 1630 Hrs IEX finalizes trade By 1700 Hrs Buyer & Sellers informed to Central Agency By 1800 Hrs Invoice raised (proof of REC trade)

11. Cleared volume : 600 RECs MCP: Rs 2200/REC Price in Rs/REC 3300 100 REC Buy @ Rs 3300 100 REC Sell @ Rs 1500 200 REC sell @ Rs 1700 300 REC sell @ Rs 2000 2200 600 REC buy @ Rs2200 200 REC buy @ 1700 600 No of REC

12. Non Solar Market : Increasing demand-supply mismatch

13. Solar Market: Increasing demand-supply mismatch

15. CSR through Voluntary REC Market • Companies Act 2013 provisions effective from 01.04.14: • Section 135 provides: 2% of PAT towards CSR for Companies with Net worth > 500 Cr or Turnover of over 1,000 Cr or Net profit > 5 Cr • Schedule (VII) : Activities which may be included by companies in their Corporate Social responsibility Policies eradicating hunger, poverty and malnutrition, promoting preventive health care and sanitation and making available safe drinking water; promoting education, including special education and employment enhancing vocation skills especially among children, women, elderly, and the differently abled and livelihood enhancement projects; promoting gender equality, empowering women, setting up homes and hostels for women and orphans; setting up old age homes, day care centres and such other facilities for senior citizens and measures for reducing inequalities faced by socially and economically backward groups; ensuring environmental sustainability, ecological balance, protection of flora and fauna, animal welfare, agroforestry, conservation of natural resources and maintaining quality of soil, air and water; protection of national heritage, art and culture including restoration of buildings and sites of historical importance and works of art; setting up public libraries; promotion and development of traditional and handicrafts: measures for the benefit of armed forces veterans, war widows and their dependents; training to promote rural sports, nationally recognised sports, paralympic sports and Olympic sports; contribution to the Prime Minister's National Relief Fund or any other fund set up by the Central Government for socio-economic development and relief and welfare of the Scheduled Castes, the Scheduled Tribes, other backward classes, minorities and women; contributions or funds provided to technology incubators located within academic institutions which are approved by the Central Government rural development projects

16. CSR through Voluntary REC Market • MOCA notification dated 18.06.2014 regarding Section 135 of Companies Act 2013-” Liberal interpretation of Schedule VII (iv)” • Schedule VII (iv) Ensuring environmental sustainability, ecological balance ……

17. CSR through Voluntary REC Market • 5 PSUs have availed about 36,000 RECs through IEX to meet their respective CSR Obligation

18. Voluntary REC Market potential (in Rs Cr) Voluntary REC market has potential to absorb over 50 % of REC issued in a year

19. Free Participation for Voluntary Client at IEX To promote Voluntary purchase of RECs by individuals, corporates, PSUs, IEX has waived off registration fees from Voluntary Clients

20. REC v/s setting up a RE Project for CSR Pre- Development Phase Development Phase Post Development Phase

21. Why RECs for CSR • RECs have several advantages as an instrument:

22. Buy RECs to go green

24. Consumers demand ‘green’ products • As per Global Consumer Study 2012 by TNSGallup and Vestas on 24,000 consumers in 20 countries: • 74% consumers would have a better perception of a product if it were produced using renewable energy • In India, 74% consumers ready to pay mote for products produced using renewable energy.

25. Enhanced efforts by companies globally to ‘Go Green’ * Source Newsweek 2014 Green Ranking

26. RECs are popular way to go greeninternationally

28. Company Snapshot 96% Market Share ~80,000MWhaverage dailytrade 3000+ Participants 2100+ Industries Transparency Liquidity Competition

29. Key statistics: REC Market at IEX 2100+ 15 States I 5 UTs 660 1663 >3 million RECs Highest: 3,69,053 RECs IEX Data as on 3rd July 2014

30. IEX Market Segments Delivery-based Contracts Day-Ahead Market since June,08 Closed , Double-sided Auction 10-12 am bidding Each 15-min block , 0.1 MW min NOC required Day-Ahead Contingency – Another window 3-5pm Intra-Day -for the same day starting 2 pm Daily-for rolling seven days (delivery starting after 4 days) Weekly-for 1 week (Monday-Sunday) Term-Ahead Market since Sep,09 Renewable Energy Certificates since Feb,11 Green Attributes as Certificates Sellers : RE generators not under feed in tariffs Buyers: Obligated entities 1MWh equivalent to 1 REC Next… Energy Saving Certificates Auction Continuous

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