The market for small-scale renewable energy certificates or STCs, which provide a rebate on solar systems, was originally intended to clear at a price close to $40. Each year the regulator was to commission solar market forecasters to estimate the likely uptake of small-scale renewable energy systems assuming a rebate built on $40 per STC.
Yet instead STC prices have traditionally been well below $40 as the forecasters massively underestimated solar PV uptake. The end result was a huge oversupply of STCs.
But this year has been quite different.
We’re now almost six months into the 2013 compliance year and it looks as though the forecasters have got it pretty much right. STC prices have steadily climbed and stayed at around $37 and just yesterday reached $38. This is now tantalisingly close to the $40 price cap.
The chart below prepared by Green Energy Markets shows (with the solid green line) the weekly amount of STCs that need to be created to reach the government’s Small Scale Renewable Energy Target for 2013. This is 398,000 per week. The dashed green line is the progressive weekly average of STCs actually created in the market.
Weekly creation of small scale renewable energy certificates (STCs) and required supply to meet regulator target – 2012 and 2013 year to date
Source: Green Energy Markets
Actual creation has averaged slightly above the target for much of the year but has been trending downwards. If we look at just the six weeks preceding June 14 it has averaged 401,000.
According to Marco Stella, a major broker of STCs at the firm TFS, there are differing views amongst participants about whether the market will under or overshoot this year’s target. But so far the consensus seems to be that supply won’t be all that far off the target.
Stella observed that, “The days of enormous surpluses are gone.”
The one area of concern appears to be that sales for solar PV in the first half of this year have been inflated by an overhang of demand from the wind-up of the Queensland premium feed-in tariff. Many householders put in applications to access the tariff which were approved, but then held-off on installing a system.
There has been a concerted marketing effort to get these people to follow-through with installing systems, but these applications have now expired. Consequently sales may drop-off in the latter half of the year.
At the same time there is a bank of about 1.5 to 2 million excess STCs from last year that were not taken into account in setting this year’s STC target. This means that even if sales of solar systems are lower in the second half, there is a buffer of supply.
A lot could happen in the second half that could lead to surprises. But this better match between supply and demand seems to indicate we may be starting to get a handle on the Australian solar PV market.