The Clean Energy Regulator has just released its initial estimate of the 2013 and 2014 renewable energy target for solar PV, solar hot water and other small scale renewable energy systems based on modelling of its consultant – SKM MMA.
The 2013 target is estimated to be 34.46 million of certificates known as STCs. This is an upward revision of 129 per cent relative to what the regulator had announced in March this year.
This incorporates an overhang of surplus STCs from last financial year of 15.99 million, so only 18.46 million of new certificates are required. In relation to energy consumers for each megawatt-hour of electricity they consume their electricity retailer will need to have acquired equivalent to 18.76 per cent of an STC. At a price of $30 per STC that’s an extra cost of $5.63 per megawatt-hour or between around 2-3.5 per cent of their electricity costs.
For 2013-14 the target is 14.49 million STCs. This will require retailers to acquire an STC for 7.69 per cent of the liable megawatt-hours they sell. If the STC price were to rise to $40 this will impose an additional cost of $3.08 per MWh or around 1 to 2 per cent of final electricity prices.
These targets are not far off market expectations, with the REC Agents Association having projected similar numbers reported in Climate Spectator several weeks ago.
While these are not too far off current market expectations, they represent a substantial upward revision from the prior forecast prepared for the Regulator by SKM MMA.
The table below indicates the latest forecast for STC creation versus what SKM MMA predicted in December 2011. It has revised upwards the number of certificates by almost a quarter for 2013 and by 35.8 per cent for 2014. This is in spite of the winding back of feed-in tariffs in Queensland and Victoria, which the prior modelling had not foreseen.
SKM MMA latest forecast vs Dec 2011 for STC creation by calendar year
If we were to take into account the large underestimate of STC creation for 2012 of 15.99 million STCs which will be rolled into the 2013 target, then the forecast made in 2011 was out by over 100 per cent.
In reading through the consultant’s latest forecast, it makes for pretty grim reading if you are in the solar PV sector. As illustrated in the chart below, their forecast illustrated by the red line indicates a huge drop-offs in the amount of solar capacity installed, stabilising at about 40,000 kilowatts (40 megawatts) per month, which is about half what it’s been averaging in the last two years.
Historical (black line) and projected (red line) solar PV capacity installations (kilowatts) – October 2012
Source: SKM MMA October 2012
However if you look at MMA’s December 2011 forecast it may not necessarily be as bad as it expects. The chart below taken from its 2011 report illustrates that the consultancy completely failed to anticipate the second spike in installations shown above that occurred in the lead up to June 30, 2012.
SKM MMA’s December 2011 projected (red line) solar PV capacity installations (kilowatts)
Source: SKM MMA December 2011
In the end trying to forecast what’s likely to happen in the solar PV market is nearly impossible. It is so volatile and changing so rapidly that one can’t really fault SKM MMA for getting it so wrong, and they acknowledged that their own forecasts were subject to a large level of uncertainty.