India renewable energy certificate trade slows in Jan amid oversupply

Demand for Indian international renewable energy certificates, or I-RECs, has been weaker than expected in January in an oversupplied market, despite expectations of a pickup over January-March as companies initiate their carbon emission auditing for the 2023-24 financial year ending March, several trade sources said.

Platts, part of S&P Global Commodity Insights, assessed India hydropower I-RECs down 7.9% month on month at 69.80 cents/MWh on Jan. 30.

India hydropower vintage 2024 I-RECs are expected to be actively traded after the first quarter of 2024 as the supply of certificates from power generated in the year from January 2024 builds up.

Market participants reported some bids for both vintage 2023 and vintage 2024 I-RECs, but they were deemed too low for a trade to conclude. Bids for both vintage 2023 and vintage 2024 I-RECs were reported at 50 cents/MWh. As a result, the value of Indian hydropower vintage 2023 I-RECs declined in the second half of January. "The recent trades have dropped up to 70 cents/MWh for vintage 2023 hydro," a trader said.

An offer level from another trader dropped from 85 cents/MWh in early January to 75 cents/MWh at the end of January, indicating a 12% decrease in one month.

A second trader said that the decline in offer levels for vintage 2023 I-RECs was expected to continue moving into 2024, as vintage 2024 I-REC supplies rise.

India I-REC issuance was steady in 2023 around 7.8 million issuances, after rising 119% in 2022, data from renewable energy certification company Evident showed. However, 2023 redemption figures were lower than issuances. About 4.5 million I-REC certificates for vintage 2023 were unredeemed, according to Evident, resulting in an issuance to redemption ratio of 2.4 to 1.

A third trader said that the current weak demand for I-RECs was in addition to power generators actively registering their projects that boosted supplies. The trader, however, said that demand for I-RECs from multinational companies was relatively healthy.

"The number of I-REC suppliers has increased from 5-10 companies to 20-25 companies in recent years," driven by government policies supporting renewable energy goals and a surge in registrations for renewable energy projects, a market participant said.