Energy Saving Certificate trading resumes after a year

Representative mage.

The Indian government on February 14 restarted trading of Energy Saving Certificates (ESCerts) after a gap of over year.

Trading of ESCerts was suspended by the Bureau of Energy Efficiency (BEE) on February 8, 2022, owing to technical issues. In this cycle, the trading will happen every Tuesday between 1 pm and 3 pm.

Rohit Bajaj, head, business development at Indian Energy Exchange Limited (IEX) told Moneycontrol that as many as 1.22 lakh ESCerts were traded on day one on their platform. There are three energy exchanges currently in India and as per data, 99.6 percent of the ESCerts were traded in IEX on day one.

“We saw a good response on day one. Trading of ESCerts has resumed after a year. There are a few positive changes brought about by the BEE this time. The most important one is that we now have a floor price for ESCerts, which was not there earlier. As per the latest rule, the floor price is Rs 1,840 per energy saving certificate,” Bajaj said.

The certificates are a means to encourage large industries in taking energy efficiency measures by upgrading their technologies. The objective is to reduce the consumption of fossil fuels to lead to a low-carbon economy.

UNDERSTANDING ENERGY SAVING CERTIFICATES

ESCerts are linked to the government’s flagship initiative - Perform, Achieve and Trade (PAT), a regulatory scheme run by BEE under the National Mission for Enhanced Energy Efficiency (NMEEE). The PAT scheme is a market-based mechanism to enhance cost effectiveness through the certification of excess energy savings in energy-intensive industries that can be traded. The scheme seeks to reduce the specific energy consumption (SEC), i.e. energy used per unit of production in energy-intensive large industries.

Under this scheme, an Energy Audit is done to verify the baseline data (current level of efficiency) and thereafter energy saving targets are given. ESCerts are issued to those plants that have achieved excess energy savings over their targets. Units that are unable to meet the targets either through their own actions or through the purchase of ESCerts are liable to financial penalty under the Energy Conservation Act, 2001.

After the issuance of ESCerts, the designated consumers (industries that have been given the targets) are required to register with the Registry as Eligible Entity before registering with the power exchanges for trading of ESCerts and bookkeeping of ESCerts. The Trading of ESCerts takes place on the power exchange platform.

PREVIOUS CYCLES

In PAT Cycle- I (2012 to 2015), eight energy-intensive industries were notified by the Ministry of Power which translated to 478 designated consumers (DCs). As many as 38.25 lakh ESCerts were issued to 309 DCs out of 478.  In PAT Cycle- I, the total sell and buy bids of ESCerts was 86,11,082 and 26,85,978 respectively, out of which 12,98,904 was cleared.

In PAT Cycle- II (2016 to 2019), three more energy-intensive industries (railways, refineries and discoms) in addition to PAT Cycle –I were added. During PAT Cycle-II, total two sessions of trading took place at the power exchanges. The total sell and buy bids of ESCerts were 18,84,778 and 4,17,484 respectively, out of which 2,86,142 was cleared volume. The discover price (MCP) in both trade sessions is Rs 250.

OUTLOOK FOR CURRENT TRADING CYCLE

Bajaj said the segment is likely to see high supply, but the buys will be tepid. “Supply is more than the demand. As of now, trading of both, PAT cycle-I and PAT cycle-II, can be done. But PAT cycle-I was completed earlier with more than 90 percent trading being completed. So now, the majority of the trading will happen for PAT cycle-II. And in this particular segment, there is very high supply and very less buy,” he said.