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Large-scale generation certificate market update - February 2018

22 February 2018

The Clean Energy Regulator has released new information about renewable energy certificate supply and demand following the 14 February 2018 surrender deadline for liable entities.

Surplus of large-scale generation certificates after final surrender

Following 2017 final surrender, 9.4 million large-scale generation certificates (LGC) remained in the market, which compares to a 13.4 million surplus at the same time last year. An additional 0.57 million LGCs were pending registration and 0.73 million were pending validation.

This year’s surplus was partly driven by some liable entities using the ability to carry forward less than 10 per cent of their liability to subsequent years. Liable entities have this option available and, if fully utilised, could represent significant additional supply in 2018 or 2019.

Update on new large-scale renewable energy projects

Since 1 January 2016, 7365 megawatts (MW) in new capacity has been firmly announced. Of this new capacity:

  • 1126 MW has been accredited
  • 975 MW has applied for accreditation and will soon be generating
  • 3375 MW is fully financed and/or under construction, and
  • 1889 MW has signed power purchase agreements (PPAs) that we expect will be fully financed and under construction this year.

Last year had a record 1088 MW of new large-scale renewable energy projects accredited. Around 2600 MW of new capacity will be accredited in 2018 and, because of additional announcements, at least a further 3500 MW in 2019.

This surge in new capacity is in excess of the capacity required to meet the Large-scale Renewable Energy Target.

Outlook to 2020

With the additional new build coming on this year and next, we estimate the number of LGCs validated will increase to around 24 million in 2018 and 32 to 34 million in 2019.* These estimates compare to the 19.1 million LGCs validated in 2017.

We estimate that the market will continue to operate with a surplus of around 5 million LGCs during 2018 and 2019. This level of surplus should ensure sufficient liquidity in the market. The surplus is projected to increase in 2020.

Graph showing the LGC supply and demand data from 2016, and projecting into 2020

Notes: ‘Total LGC supply’ includes surplus LGCs from the previous year and new registered LGCs. ‘Voluntary demand’ includes a range of demand that is an estimate and could change due to market factors.

*Generation from baselined hydro power stations has a year to year variability and can have an impact on actual LGC validations. Generation estimates may also vary due to any changes to the speed of construction or commissioning schedules for accredited power stations.

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