India I-REC vintage spread narrows in July on arbitrage buying

India's International Renewable Energy Certificate vintage spread narrowed sharply as buyers shifted procurement strategies to capitalize on price arbitrage, creating an unusual supply squeeze for older certificates.

The spread between vintage H2 2025 and vintage 2026 I-RECs narrowed to 6 cents/MWh in July from 19 cents a year earlier, reversing typical market dynamics where newer vintages command significant premiums, according to market participants.

"Surprisingly, vintage H2 2025 has a boom," a Karnataka-based trader said, adding that "prices are degrading for vintage 2026."

Platts assessed vintage 2026 at 50 cents/MWh on July 22, down 2 cents month over month and H2 2025 at 44 cents/MWh, unchanged over the same period.

Strategic shift to minimize cost

A Mumbai-based trader said that the shift to older vintages represents a strategic procurement approach as corporate buyers seek to minimize costs while meeting sustainability commitments.

"More H2 2025 demand is coming. In fact, it is more than the demand for vintage 2026. For vintage 2026, buyers are showing more interest in forward delivery rather than spot," a second Mumbai-based trader said.

The buying surge for H2 2025 certificates has exhausted available inventory, with some volumes now reserved to retain clients, a Gurugram-based trader said.

The trader added that contract deals for small volumes of H2 2025 wind and solar I-RECs were signed at prices above 55 cents/MWh with various end buyers, representing an 11-cent premium to spot market levels.

Demand lags supply for vintage 2026

The vintage dynamics contrast sharply with year-ago patterns, when the 19-cent spread reflected typical market expectations that newer vintages command premiums.

For vintage 2026, persistent oversupply has weighed on prices despite a pickup in trading activity.

A third Gurugram-based trader sold 80,000 MWh of wind and solar vintage 2026 at 50 cents/MWh on July 22, while multiple large-volume trades were reported through mid-July.

However, overall sentiment for vintage 2026 remained bearish, with traders expecting further price declines.

"We think the prices will decline further, therefore, we are trying to sign as many deals as possible right now," a Kolkata-based trader said.

The oversupply has prompted some generators to hold inventory rather than accept current market levels.

A Telangana-based generator said that while low demand volumes mean "deals can be closed at any price," they are holding inventory for larger orders and "not entertaining low bids from buyers."

Market participants agreed that the demand has slowed due to seasonal factors, with buyers typically procuring most during Q4 and Q1.

However, some traders expressed optimism for recovery in the coming months.

"Things should move this month or next. Some large tenders come in about August/September," the second Gurugram-based trader said.