Trading of ESCerts on IEX

Transcription

1 Trading of ESCerts on IEX Akhilesh Awasthy Director (Market Operations) Workshop by BEE on ESCerts Trading and PATNet Portal 16 th Dec 2015, IIC New Delhi

2 Company Snapshot 96% Market Share ~80,000MWh average daily trade Participants Industries 50+ Discoms (all) 300+ Generators Transparency Liquidity Competition

3 POWER EXCHANGE Regulated by Central Electricity Regulatory Commission (CERC) Nation-wide voluntary access Delivery Based contracts E-trading Robust Platform No counterparty risk

4 Participation at IEX Consumer: 3044 Generator:

5 Industrial segments with IEX Auto Components 6% Paper 3% Cement 4% Cotton 1% Others 9% Textile 29% Chemical 9% Metal 24% Manufacturer 15%

6 Trading on Power Exchanges Trading/Market Regulator (CERC) Member Client Trade ESCerts Registry Member Trade Clearing Banks

7 Achieved Achieved Achieved Initial Initial Initial Why ESCerts Trading? No ESCerts Market With ESCerts Market Total Cost of Abatement = (5*1000*10000)+(5*1000*15000)+(5*1000*20000) = Rs 22,50,00,000 Total Cost of Abatement = (7*1000*10000)+(5*1000*15000)+(3*1000*20000) = Rs 20,50,00,000 Savings to Economy = (22,50,00,000-20,50,00,000) = Rs 2,00,00,000 Initial SEC = 10 Target SEC = Achieve EE Savings with less cost to economy Abatement Cost Plant-1 Plant-2 Plant-3 Rs 10000/toe Rs 15000/toe Rs 20000/toe Trade ESCerts on PX Assume 1 SEC 1000 toe

8 ESCerts Mechanism Start 2012 Compliance Obligated Entities Mandatory Energy intensive industries from 8 sectors, 478 in total Target Mechanism Banking Denomination of ESCert Issuance Cycle span Market Place Trading Regulator Administrator & Scheme R tor Central Registry Penalty 6.6 Mtoe for1 st cycle, allocated on SEC basis for each plant Market based Cap and Trade Allowed till next cycle 1 toe Ex-post based on Energy Audit (80% issuance for intra-cycle, every year) 3 yrs ( for 1 st Cycle) Multiple Power Exchanges, regulated by CERC CERC BEE POSOCO As per Section-26(1A) of EC Act, 2001, to be decided by SDA

9 Regulatory approval for PXs to provide ESCerts trading platform 1) CERC to notify PAT Trading Regulations/Order 2) Power Exchanges to submit respective Business Rules (by including a Schedule for ESCerts) to CERC for approval, so as to commence trading Business Rules of IEX for ESCerts shall cover the following: Price Discovery mechanism Contract specifications for ESCerts Risk Management mechanism Trading timelines Delivery, Surveillance and Clearing & Settlement Member & Client categories

10 Proposed ESCert Contract on IEX Name of the Tradable Instrument: Underlying Instrument Types Price Quotation Price tick Price Limits Volume tick Minimum Order volume limit: Transaction Fee Energy Savings Certificate (ESCert) Energy Savings Attributes of 1toe of energy savings by Designated Consumer allowed in Energy Conservation (Energy Consumption Norms and Standards for Designated Consumers, Form, Time within which, and Manner of Preparation and Implementation of Scheme, Procedure for Issue of Energy Savings Certificate and Value of Per Metric Ton of Oil Equivalent of Energy Consumed) Rules, 2012 ESCert denominated by Cycle (e.g. ESCERT-C12-15) INR/ESCert 1 INR Not Applicable 1 ESCert 1 ESCert Specified by the exchange from time to time, upon approval by the Commission Matching Closed double-sided uniform price auction Trading Cycle Once a month, Weekly trading from Jan 15 to Form -D submission date (TBD)

11 Proposed Price Discovery Mechanism Closed Double-sided Uniform Price Auction Prerogative of respective Power Exchange to define its own matching rules, and notify the same through Business Rules IEX will utilise the matching engine used for REC mechanism, all the matching principles to remain same as that of REC

12 Flow of ESCerts trading ESCerts Registry

13 Trading Timelines TIME on TRADE DAY DETAILS Pre-trade Phase: By Hrs Exchange to check Initial Margin of Members Order Accumulation phase (Bidding) Hrs to Hrs Order Accumulation Order matching and trade finalization By Hrs Exchange to send details of maximum offer placed by Sellers to Depository By Hrs Registry to send Exception report intimating any exceptions (excess Sell) By Hrs Finalization of trade results after removing defaulters orders Exchange to inform participants about trade results By Hrs Exchange to inform Registry, the details of successful buyers and sellers Settlement Phase By Hrs on T Day Files to be sent by Exchange to banks for actual debits(pay-in) By Hrs on T+1 day Files to be sent by Exchange to banks for actual credits (Pay-out) (next bank working day) Delivery Phase By Hrs on T Day Registry to debit ESCerts in Sellers Accounts and credit the same to Buyers Accounts By 18:00 Hrs O T Day Exchange to raise invoices to each participant as proof of transfer of ESCerts. Reports shall be sent to all successful Members

14 Proposed Risk Management Mechanism Risk management mechanisms shall be designed by respective PX and shall be notified through Business Rules A Member or a Client, as applicable, is allowed to transact in a contract only when he maintains the requisite Margin, including any additional Margin, as specified by PX On IEX, Member will be allowed to place a purchase order in ESCerts against cash amount made available (Margin Money), equivalent to 100% of the order value. Sell orders are permitted irrespective of margins Exchange has the right to impose penalty on defaulting Member, who short-sell ESCerts in excess of available ESCerts in his Registry account, as decided from time to time

15 Surveillance, Delivery and C&S Surveillance: In order to ensure market integrity and to avoid market abuses, the Exchange will use various on-line and off-line surveillance tools like: Validation of orders Price & Volume movement monitoring Price rigging, concentration, price manipulation and other market abuses The PX shall have the right to take appropriate actions in such cases Delivery: Delivery of ESCerts shall be as per the Regulation/Order issued by Commission and in pursuance to the BEE Rules, Clearing & Settlement: Clearing House of PX will monitor and perform all activities relating to funds settlement, margining, managing the settlement guarantee fund, and other relevant matters

16 Members & Clients of IEX All the existing Members and Clients of the Exchange are eligible to trade ESCerts on the Exchange Platform of IEX. However, Exchange can also notify a separate category of Member & Client who can participate only in the ESCerts market segment. Different terms and conditions for Members of the Exchange shall be defined in the Business Rules. Member trading in ESCerts shall be governed by Regulation 26 of CERC (Power Market) Regulation-2010, The BEE Rules-2012 for ESCert trading, and the CERC Regulations (yet to be notified). Only Designated Consumers who are notified by BEE shall be permitted to become Members/Clients of PX for ESCerts trading Fees and Charges levied by PX on Members & Clients for ESCerts trading shall be as notified by respective PX from time to time

17 REC Vs ESCerts Scheme REC ESCert Cycle 1 year 3 years Life of Cert Target Unit Buyers 365 days (second time extended to 1095 days) State specific set by SERC, for Solar and Non-Solar 1MWh equivalent Renewable Attribute Obligated Entities (Discoms, CPPs and OA Consumers) Closure of second Cycle (> 3 years) Plant/DC specific, set by GoI 1 Toe Energy Conserved Designated Consumers falling short of Target Sellers Qualified Renewable Generators Designated Consumers surpassing Target Banking No Yes (1 Cycle) Multiple Trading No (Once traded renders Extinguished) --- Floor Price Yes (Solar: Rs 3,500 /MWh, Non-Solar: Rs 1,500/MWh) Forbearance Price Yes (Solar: Rs 5,800 /MWh, Non-Solar: Rs 3,300/MWh) Regulator CERC (Trading) & SERCs (Compliance) BEE(Scheme) & CERC(Trading) No No

18 May'12 Nov '12 May'13 Nov'13 May'14 Nov'14 May'15 Nov'15 No. of RECs traded Mar'11 Sept'11 Mar'12 Sept'12 Mar'13 Sept'13 Mar'14 Sept'14 Mar'15 Sep'15 No. of RECs Traded Trade Synopsis of RECs 800,000 Non-Solar REC Prices & Volume IEX-Volume PXIL- Volume IEX PXIL 4, , , ,000 3,000 2,000 1,000 Market Clearing Price (In RS/REC) Solar REC Prices & Volume Vintage Multiplier 14,000 12,000 10,000 8,000 6,000 4,000 2,000 Market Clearing Price (Rs/REC) 0 0

19 Capacity Registered (MW) Apr '12 Sept'12 Feb '13 July'13 Dec'13 May'14 Oct'14 Mar'15 Aug'15 May '12 Oct '12 Mar '13 Aug'13 Jan'14 June '14 Nov'14 Apr'15 Sept'15 Number of RECs (Crores) Number of RECs (Crores) Over Supply of RECs Non-Solar RECs Buy Bid Sell bid Traded Sell Bid Buy Bid Traded Solar RECs RECs Issued RECs (as on ) 2.88 Cr REC Projects Slowing Down 2015 Non Solar Capacity (MW) Solar Capacity (MW)] RECs Traded + Redeemed 1.15 Cr Inventory 1.73 Cr (60%) NAPCC proposes 10% of generation by 2015 from Renewables, which amounts to BUs FY FY FY FY 14-15

20 IEX

21 Who Can become Members of IEX? Entities eligible for Membership: Inter-State Generating Stations (ISGS) Distribution Licensees State Generating Stations IPPs CPPs and IPPs (with consent from SLDC) Open Access Customers (with consent from SLDC) Electricity Traders / Brokers (Including REC & ESCerts) Designated Consumers (For ESCerts)

22 IEX Membership Types Proprietary Member Professional Member Electricity Traders Right to trade and clear on its own account Trade and clear on behalf of its Clients Trade and clear on behalf of its Clients who can trade ESCerts on its own behalf and also its companies provided the ownership remains the same NO CREDIT /FINANCING CREDIT /FINANCING Clients Eligible Designated Consumers

23 Financial Requirements (For REC Membership) Fees Professional & Proprietary & Electricity Trader (Full Payment Option) Proprietary member (Light Payment Option) Admission fee Rs. 10,00,000 Rs. 5,00,000 Interest Free Security Deposit Annual Subscription Fees Rs. 5,00,000 Rs. 2,50,000 Rs. 2,00,000 Rs. 1,00,000 Processing Fees Rs. 10,000 Rs. 10,000 TOTAL Rs. 17,10,000 Rs. 8,60,000 Exchange Transaction Rs 20/REC Rs 30/REC

24 Client of Exchange (Proposed) Requirements to become a Client of a Member Annual Client / Portfolio Subscription Fees of IEX Member s Fee Exchange Transaction Fee Rs. 20,000 Decided by respective Member, as guided by CERC Power Market Regulations 2010 Rs 20/REC (TBD for ESCert) *All Designated Consumers registered with Central Registry are eligible to become a Client for ESCerts Trading.

25 How to Move Ahead Become Member or Client (of a Member) options Rs 8.6 Lacs +3p/kWh transaction fee Rs 17.1 lacs + 2p/kWh transaction fee 0.2 Lakh p.a Technical Requirements As specified by CERC/BEE for ESCerts Connectivity with Exchange can be done in two ways Internet Immediate Leased Line Start Trading

26 Thank You for your attention Best Power Exchange in India Enertia Awards 14, 13 & 12 India Power Award 2014 Power Business View 2014 Inc India Innovative 100 Award for Innovation in Product and Technology Best Performing Power Exchange Power Line Awards 13 & 12 India Power Awards 15 & 09