Trading of ESCerts on IEX

Akhilesh Awasthy
Director (Market Operations)

Workshop by BEE on
ESCerts Trading and PATNet Portal
16th Dec 2015, IIC New Delhi

Company Snapshot

96% Market Share ~80,000MWh average daily trade

3400+ Participants
50+ Discoms (all)

3000+ Industries
300+ Generators

Transparency

Liquidity

Competition

POWER EXCHANGE
Regulated by Central Electricity Regulatory Commission (CERC)

Nation-wide
voluntary access

Delivery Based
contracts

Robust Platform

E-trading

No counterparty
risk

Participation at IEX
6

6
8

402

79
4

273

22

33

16

3
1

48

0
7

23

672

57

59
0

25

216

398

15

38

Consumer: 3044
761

11

Generator: 304

Industrial segments with IEX

Paper Cotton
3%
1%
Cement
4%

Others
9%
Textile
29%

Auto
Components
6%
Chemical
9%

Manufacturer
15%
Metal
24%

Trading on Power Exchanges

Trading/Market Regulator (CERC)

Member
Client

Member

Trade

Trade

ESCerts
Registry

Clearing
Banks

Why ESCerts Trading?

Total Cost of Abatement =
(5*1000*10000)+(5*1000*15000)+(5*1000*20000)
= Rs 22,50,00,000

No ESCerts Market

Savings to
Economy =
(22,50,00,00020,50,00,000) =
Rs 2,00,00,000

Total Cost of Abatement =

(7*1000*10000)+(5*1000*15000)+(3*1000*20000)
= Rs 20,50,00,000

With ESCerts Market

Initial
= 10
SEC

Abatement
Cost

Achieved

Initial

5
Achieved

Initial

3
Achieved

Target
SEC = 5

Initial

Plant-1

Plant-2

Plant-3

Rs 10000/toe

Rs 15000/toe

Rs 20000/toe

Trade ESCerts on PX

Achieve EE
Savings with
less cost to
economy

Assume 1 SEC 1000 toe

ESCerts Mechanism
Start

2012

Compliance

Mandatory

Obligated Entities

Energy intensive industries from 8 sectors, 478 in total

Target

6.6 Mtoe for1st cycle, allocated on SEC basis for each plant

Mechanism

Market based Cap and Trade

Banking

Allowed till next cycle

Denomination of ESCert

1 toe

Issuance

Ex-post based on Energy Audit (80% issuance for intra-cycle,

every year)

Cycle span

3 yrs (2012-15 for 1st Cycle)

Market Place

Multiple Power Exchanges, regulated by CERC

Trading Regulator

CERC

Administrator & Scheme Rtor BEE

Central Registry

POSOCO

Penalty

As per Section-26(1A) of EC Act, 2001, to be decided by SDA

Regulatory approval for PXs to provide

ESCerts trading platform
1)
2)

CERC to notify PAT Trading Regulations/Order

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

Proposed ESCert Contract on IEX

Name of the Tradable Instrument:
Underlying

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

Instrument Types
Price Quotation
Price tick
Price Limits
Volume tick
Minimum Order volume limit:
Transaction Fee

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
Trading Cycle

Closed double-sided uniform price auction

Once a month, Weekly trading from Jan15 to Form -D
submission date (TBD)

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

Flow of ESCerts trading

ESCerts
Registry

Trading Timelines
TIME on TRADE DAY
DETAILS
Pre-trade Phase:
By 12.00 Hrs
Exchange to check Initial Margin of Members
Order Accumulation phase (Bidding)
13.00 Hrs to 15.00 Hrs
Order Accumulation
Order matching and trade finalization
By 15.30 Hrs
Exchange to send details of maximum offer placed by Sellers to Depository
By 16.00 Hrs

Registry to send Exception report intimating any exceptions (excess Sell)

By 16.30 Hrs

Finalization of trade results after removing defaulters orders

Exchange to inform participants about trade results

By 17.00 Hrs
Settlement Phase
By 17.00 Hrs on T Day

Exchange to inform Registry, the details of successful buyers and sellers

Files to be sent by Exchange to banks for actual debits(Pay-in)

By 11.00 Hrs on T+1 day

(next bank working day)
Delivery Phase
By 18.00 Hrs on T Day

Files to be sent by Exchange to banks for actual credits (Pay-out)

By 18:00 Hrs O T Day

Registry to debit ESCerts in Sellers Accounts and credit the same to Buyers
Accounts
Exchange to raise invoices to each participant as proof of transfer of
ESCerts.
Reports shall be sent to all successful Members

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

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, 2012.
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

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

REC Vs ESCerts Scheme

REC

ESCert

Cycle

1 year

3 years

Life of Cert

365 days (second time extended to

1095 days)

Closure of second Cycle

(> 3 years)

Target

State specific set by SERC, for Solar

and Non-Solar

Plant/DC specific, set by GoI

Unit

1MWh equivalent
Renewable Attribute

1 Toe
Energy Conserved

Buyers

Obligated Entities (Discoms, CPPs and

OA Consumers)

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

No

(Solar: Rs 3,500 /MWh,

Non-Solar: Rs 1,500/MWh)

Forbearance Price

Yes

(Solar: Rs 5,800 /MWh,

No

Non-Solar: Rs 3,300/MWh)

Regulator

CERC (Trading) & SERCs (Compliance)

BEE(Scheme) & CERC(Trading)

Trade Synopsis of RECs

Non-Solar REC Prices & Volume

800,000

PXIL- Volume

Price @ IEX

4,000
Price @ PXIL

600,000

3,000

400,000

2,000

200,000

1,000

Sep'15

Mar'15

Sept'14

Mar'14

Sept'13

Solar REC Prices & Volume

100000

14,000

Vintage
Multiplier

12,000

80000

10,000
60000

8,000

40000

6,000

4,000
20000

2,000

Nov'15

May'15

Nov'14

May'14

Nov'13

May'13

Nov '12

May'12

Market Clearing Price

(Rs/REC)

No. of RECs traded

Mar'13

Sept'12

Mar'12

Sept'11

Mar'11

Market Clearing Price

(In RS/REC)

No. of RECs Traded

IEX-Volume

0.1

0.05

RECs Traded + Redeemed

1.15 Cr

Inventory

1.73 Cr (60%)

NAPCC proposes 10% of generation by 2015 from

Renewables, which amounts to 104.51 BUs

Capacity Registered (MW)

(as on 15.12.2015)

2.88 Cr

Sept'15

Apr'15

June '14

REC Projects Slowing Down

RECs
RECs Issued

Nov'14

Aug'15

Mar'15

Oct'14

May'14

Dec'13

July'13

Feb '13

Sept'12

0.15

Jan'14

0.2

Sell Bid
Buy Bid
Traded

Aug'13

Traded

0.4

0.2

Mar '13

Sell bid

0.6

Solar RECs

Oct '12

Buy Bid

0.8

0.25

May '12

Number of RECs (Crores)

Non-Solar RECs

Apr '12

Number of RECs (Crores)

Over Supply of RECs

2500
2000

Non Solar Capacity (MW)

2015

Solar Capacity (MW)]

1500
1175
1000
491

500
0

307
0

FY 11-12

62

FY 12-13

FY 13-14

444
197

FY 14-15

Trade @ IEX

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)

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

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

Rs. 5,00,000

Rs. 2,50,000

Annual Subscription
Fees

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

Client of Exchange (Proposed)

Requirements to become a Client of a Member
Annual Client / Portfolio
Subscription Fees of IEX

Rs. 20,000

Members Fee

Decided by respective Member, as guided by CERC

Power Market Regulations2010

Exchange Transaction Fee

Rs 20/REC (TBD for ESCert)

*All Designated Consumers registered with Central Registry are

eligible to become a Client for ESCerts Trading.

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
Client @ 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

Thank You for your attention

www.iexindia.com

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