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Renewable Energy Target certificate market updates now available

30 October 2019

The Clean Energy Regulator has released October market updates for large-scale generation certificates (LGCs) and small-scale technology certificates (STCs), providing our view on progress towards the 2020 target and key factors that may impact certificate supply and demand.

Current market observations: LGCs

  • The 6.4 gigawatts (GW) of new large-scale renewable energy capacity required to be accredited between 2017 and 2019 to meet the 2020 Large-scale Renewable Energy Target (LRET) was approved on 30 August.
    • At the end of September 2019, the accredited capacity for 2019 so far was 7.3 GW.
  • Since 2016, over 13 GW of new large-scale renewable energy projects are generating, under construction, committed or probable to be built.
    • Recent additions to the pipeline have been driven by smaller market players and corporate power purchase agreements.
  • The LGC balance may be tight this year depending on the amount of paid shortfall and the 10 per cent carry forward mechanism.
    • We estimate that 35.3 million LGCs will be in the market by February 2020. This includes expected supply of 28.2 million LGCs and a 7.1 million LGC surplus.
    • It is expected that around 4.7 million of these LGCs may be unavailable for surrender due to shortfall charge refunds and voluntary surrender.
  • The Clean Energy Regulator’s position on shortfall remains unchanged; liable entities may defer liability through paid shortfall or carried forward shortfall of less than 10 per cent.
  • LGCs surrendered for shortfall charge refunds are not subject to the vintage rule, this means that entities who intend to surrender LGCs for the refund in February 2020 can use LGCs created and validated in 2020.
  • LGC spot prices were $44 on 17 October 2019.
    • LGC forward prices for 2020 and 2021 are at $34.75 and $15.60 respectively.

For the complete LGC market update please read the Large-scale generation certificate market update – October.

Current market observations: STCs

  • The Clean Energy Regulator estimates a record 2200 megawatts (MW) will be installed in 2019, higher than the previous record of 1612 MW installed in 2018.
  • There is a continued trend towards the installation of larger small-scale solar PV systems.
    • 39 per cent of systems installed are between 6.5-7 kilowatts, compared with 21 per cent in 2018.
  • Strong growth is occurring across all regions, particularly Queensland, New South Wales and Victoria (37 per cent, 41 per cent and 62 per cent respectively).
  • The market is expected to remain in a material surplus.
    • We expect the 2020 small-scale technology percentage (STP) to be higher than the non-binding STP of 14.56 per cent.
    • The STC clearing house is unlikely to be used for any material purchases until at least quarter three in 2020.
  • Approximately 10.3 million STCs were in the market as at 30 September 2019.
  • The STC spot price has remained relatively stable this year with the average price sitting at $37.00. The spot price on 30 September 2019 was $37.85.

For the complete STC market update please read the Small-scale technology certificate market update – October.

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