India's NTPC tests the waters with auction of 100,000 carbon credits, more to follow

India’s largest thermal power generator NTPC is auctioning 100,000 VCS registered carbon credits and there is more to follow from its nearly 5 million carbon credits kitty, industry sources told S&P Global Commodity Insights Aug. 30.

“NTPC started registering its projects in 2012-2013 and is now trying to encash the carbon credits for the first time,” one source close to the tendering process said.

“Depending on the response, one or two million credits could be likewise offered next for sale -- this time it could be an international tender.”

Prices for VCS certified wind/solar credits sourced from India were heard at $0.70-$1.0/mtCO2e over the past few sessions for 2021-2022 vintages, while prices for older vintages were lower than these levels.

The tender, from unit NTPC Green Energy, opened on Aug. 16 offering carbon credits registered in 2016 and 2017. The selection process will see an online auction, likely by October, when the highest bidders will win the carbon credits, according to the source.

NTPC's sale of carbon credits comes against the backdrop of an announcement earlier in August by the Integrity Council for the Voluntary Carbon Market (ICVCM) that renewable energy methodologies failed to receive the high-integrity Core Carbon Principles label.

NTPC did not respond to questions from S&P Global Commodity Insights regarding the tender and the company’s future plans for managing its carbon credits.

“NTPC Green appears to be strategically managing its inventory in response to evolving market standards and dynamics,” said Abhijeet Thakkar, senior analyst for Asian carbon markets at S&P Global Commodity Insights.

“While the [ICVCM’s] exclusion may impact the perceived value of these credits, companies aiming to enhance their CSR profiles might still find the purchase of these older vintage credits appealing as part of their long-term commitment to emission reductions.”

Market reacts

Carbon market sources also said demand for voluntary carbon credits across various segments was sluggish amid brewing integrity-related concerns and excess supply of credits in the market.

With many participants in Europe away from the market amid the ongoing summer holidays, movement in terms of buying was also at lower levels, they said.

There were expectations among market participants of an improvement in demand for credits from a few segments such as tech-based and nature-based removal but NTPC’s carbon credits do not come from these technologies.

Sources said that buyers' preference for removal-based credits, such as from afforestation projects, is gradually increasing due to its significance in eliminating traces of carbon from the atmosphere over avoidance-based credits.

An India-based developer said that given the market condition, NTPC’s carbon credits may sell at around $1.0/mtCO2e.

On the other hand, “if they receive lucrative bids from participants and are able to conclude the tender at higher price levels, then other private entities may also look at selling their credits through the tender route,” the developer said.

“There could be some traders who would be interested in bidding for the tender but they would also have to make sure they have an end user to sell it to already,” an India-based trader said.

This trader estimated NTPC may not get more than $2/mtCO2e from bidders.

Looking ahead

The industry sources said that going forward NTPC is expecting to generate 20 million carbon credits every year as its renewables portfolio expands and more projects are registered.

NTPC has a renewable energy capacity of 7.43 GW out of an overall capacity of 76 GW. Under its energy transition strategy, it aims to increase renewable power capacity to 60 GW by 2032.

NTPC’s wind, solar and hybrid projects are spread nationwide. In addition, it is working on renewable hydrogen-based mobility and other ESG projects.

“The company will be having a lot of supply every year,” the second industry source said. “India is coming out with a carbon market… as times progress, the carbon market will become very vibrant.”

NTPC’s carbon credits, all from its wind and solar farms, are registered with CDM, GCC and International Carbon Registry, in addition to Verra, the first source said.

The company formed a carbon management unit a couple of years ago to actively manage carbon credits.

NTPC expects to place orders for 1 GW of electrolyzers by 2026-27 once firm offtake deals are in place, Mohit Bhargava, CEO of NTPC Renewable Energy told Commodity Insights in September 2023.

India is one of the largest exporters of carbon credits in the global voluntary carbon market, accounting for 17% of total issuances across all project types. The government has been working on a national carbon market meant to trade carbon credits registered and verified domestically.

Platts, a unit of Commodity Insights, assessed Renewable Energy Current Year prices unchanged from the previous session at $1.25/tCO2e on Aug. 30.