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  • Writer's pictureGeneral Carbon

Energy Saving Certificates: Look what the market is discovering

Price of Energy Saving Certificates from PAT cycle 1 shows no sign of stabilization. After 7th round of trading the EScert price seems to be on an eternal nosedive. Every trading session after the second trading session has been discovering new low.

The first trading session saw the clearing price of EScerts stand at Rs.1200 per EScert. After holding on to that price in the second weekly trading session, the clearing price fell to Rs1000 in the third session.


The clearing price of Rs.350 per EScert in the 7th trading session implies that the EScert price is now about 30% of the price discovered in first trading session. The weighted average price per EScert till date is about Rs.819.

The total volume of EScerts traded thus far is 1,88,590.  Clearly there are many more EScerts to be purchased to cover shortfall of PAT cycle 1. However, the no of purchase bids has significantly declined in the most recent trading session. This could be due to


buyers holding back their purchase to leverage the declining price trend and reduce their compliance cost. With about one and half month to go before the time to comply through EScerts ends – how long buyers will withhold their buying decision is to be seen. And whether pushing purchase decisions to later trades leads to a demand spike pulling up the price is also a scenario that purchasers will factor in when deciding to trade.

The surplus savings which PAT has enabled works out to Rs0.03 per kwh as per the price discovered in the 7th and most recent trading session. So if one were to stand at the vantage point of the 7th trading session and look at energy savings which more capital intensive interventions can potentially unveil, then the upside provided by PAT’s flexible


market mechanism is a meagre 3 paise per kwh. This is perhaps not enough to swing an unacceptable payback period to within an acceptable time horizon. The evolution of per kwh contribution of EScert price, as shown above has not been encouraging to those looking at PAT as a mechanism for incentivizing voluntary ambitious energy efficiency improving interventions enabled by additional earnings through EScerts.

EScerts trading started with a wide divergence (16.69%) between the maximum purchase bids which could have been theoretically cleared if there was perfect buyer and seller alignment. That divergence has been progressively reducing till the first 4 trading


sessions. In the fourth trading session that divergence stood at only 0.10%. This is indicative of sellers reacting and quickly aligning their bids to catch the buyer in the face of the fact that supply of ESCerts was reported to be 2.7 times the ESCert demand. With divergence well below 0.5% in the recent trading sessions, the alignment reached at the 4th session seems to be prevailing for now.

So where is EScert price headed?  Sellers are hoping that the EScert’s clearing price increases and the buyers are eagerly waiting for further fall in price – as we advance to the next weekly trade. One wonders whether at this EScert price there is more merit in banking than selling. Buyers see the price trend as an ever increasing possibility of complying at even lower cost. As the sellers and buyers try to consolidate their positions, it will be interesting to see how the EScert price fares.

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