India wind, solar current-year I-REC prices hit all-time low due to oversupply

Prices for India's current-year International Renewable Energy Certificates, or I-RECs, for wind and solar technologies hit an all-time low on Sept. 12, driven by significant oversupply as unconsumed certificates continue to flood the market, with demand lagging far behind.

As of the latest data, unredeemed I-RECs total 10.6 million certificates, including 1.96 million for vintage 2024 and 4.04 million for vintage 2023.

Platts, part of S&P Global Commodity Insights, assessed the Indian wind and solar vintage 2024 I-REC contract at Rupees 44/MWh (52.4 cents/MWh) on Sept. 12, marking the lowest price for current year's contract since assessments began. The current year's contract has declined by 36% from Rupees 71/MWh (85.1 cents/MWh) since the assessments started in April 22.

Market sources have consistently reported a weak I-REC market, compounded by low demand since December 2023. In addition, buyers are reportedly anticipating further price declines in response to the ongoing oversupply.

"We received a notable amount of inquiries from buyers, but no trades were finalized as buyers are expecting lower prices due to the surplus in the market," a source said.

While some sources noted a rise in buying interest during the June-July period, the market’s supply vastly outpaced this uptick in demand. In addition, bid levels were reportedly too low for sellers to entertain.

"There is some demand, but bids were too low to be accepted, leading to fewer deals being concluded recently," another source said.

The heavy surplus of I-RECs has driven bid levels down to around Rupees 33-42/MWh (40-50 cents/MWh), contributing to the ongoing price decline.

Going ahead

Some market participants indicated that demand may pick up between September and December, as buyers typically wait eight-10 months into the year to assess their annual electricity consumption before purchasing I-RECs towards the year-end.

"We expect redemptions to increase in the next few months, especially from September to December, as buyers are looking to capitalize on the low prices," a source said. "It’s common for buyers to wait most of the year before purchasing I-RECs."

However, uncertainty has also arisen following a recent announcement from the Integrity Council for the Voluntary Carbon Market in August, which stated that carbon credits issued under existing renewable energy methodologies will not qualify for the high-integrity Carbon Core Principles label. This has led to a "wait-and-see" approach from many buyers, with most market participants agreeing that renewable energy project owners in India may shift from the Voluntary Carbon Market to I-RECs to monetize their power generation. This potential shift could further increase issuance and place additional downward pressure on prices.

"The recent CCP labeling changes might encourage renewable energy project owners to move from VCM to I-REC, as buyers may have more confidence in projects registered under the I-REC mechanism," a trade source said.

"We’ve already seen a shift and expect more players to transition to I-RECs," another source said.