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Small-scale technology certificate market update - December 2018

21 December 2018

Current market observations

  • 5.5 million small-scale technology certificates (STCs) remained in the market following quarter three surrender on 28 October 2018. As at 20 December 2018, there were over 11 million registered STCs in the market.
  • Solar PV installations and installed capacity have continued to grow in the latter half of 2018; there have been 193,960 installations with a combined capacity of 1337 megawatts (MW) that have been validated so far this year. Due to the 12 month creation rule, we expect that the actual installed capacity for 2018 will likely exceed 1600 megawatts.
  • The surplus against the 2018 small-scale technology percentage (STP) is estimated to be between six and eight million STCs by the end of the year.
  • We expect the 2019 STP is likely to be higher than the non-binding STP of 12.13 percent published earlier in the year.

Post quarter three surrender analysis

Quarter three surrender ended on 28 October 2018, accounting for 25 per cent of the year’s total liability (around 7.3 million STCs). There was 99.99 per cent on time surrender.

5.5 million STCs remained in the market after surrender. 5.1 million STCs were held in REC Registry accounts and 352,360 were pending clearing house sale. A further 1.1 million STCs were pending registration.

The STC spot price increased since our October market update from $34.80 to $36.401 at 17 December 2018.

Over 247,190 small-scale renewable energy system installations have been validated so far this year:

  • 193,960 solar PV systems with a combined capacity of 1337 MW, and
  • 53,230 solar water heaters (including air source heat pumps).

Estimated STC surplus after quarterly surrender

Estimated STC surplus after quarterly surrender

Creation rates and the small-scale technology percentage (STP)

The average weekly creation rate is currently 600,653 STCs, approximately 175,653 above the rate required to meet the 2018 STP of 22.1 million STCs. Consistent with trends in previous years, we expect STC creations to spike towards the end of the year.

That means there are more than sufficient STCs currently registered in the REC Registry to cover quarter four’s 15 per cent surrender (around 4.5 million STCs) on 14 February 2019.

If the increased rate of installations continues, we estimate an overall market surplus of between eight to ten million STCs after quarter four surrender on 14 February 2019.

Clearing house activity

The size of the surplus in the STC market affects the length of time it may take for STCs to sell through the STC clearing house.

When a surplus of STCs in the market emerges, STCs are typically bought from the open market and trade below $40. Low rates of clearing house sales will occur during these periods; a little over 7300 STCs were sold via the clearing house for quarter three liabilities.

Participants who offer their STCs for sale via the clearing house should expect a significantly delayed sale until the excess supply in the broader market has diminished. The STC clearing house operates on a first-in first-served basis, the oldest STCs currently awaiting sale are from November 2017. There is no guarantee of a sale through the clearing house while the market remains in material surplus.

STC purchases through the clearing house

YearDemand set by small-scale technology percentageSTC clearing house salesPercentage of sale against the STP
201517,487,6678,926,84051%
201616,957,02413,719,23081%
201715,100,0002,314,95115%
201822,100,000142,4400.6%

Installation trends

The number and size of solar PV systems has continued to increase in 2018. 193,960 solar PV system installations with a combined capacity of 1337 MW have been validated as at 17 December 2018. This is a 31 per cent increase in the number of installations and a 49 per cent increase in total capacity compared to the same period last year.

We project that at least 1600 MW of solar PV capacity will be installed overall in 2018; however due to the 12 month creation rule not all of this capacity will flow through to STC creations in the 2018 year.

The increase in installations and capacity is attributable to significant increases in 6-7kW systems and 10-100kW systems. The increase in 6-7kW systems observed in 2017 has continued into 2018. In particular, 6-7kW systems installations have increased by 135 per cent and capacity by 138 per cent. 6-7kW systems also have the highest uptake of concurrent battery storage.

10-100kW systems continue to increase, accounting for 9 per cent of installations and 28 per cent of capacity, which is a 72 per cent and 61 per cent increase respectively compared to the same time last year.

SRES PV capacity composition

SRES PV capacity composition

53,230 solar water heater (including air source heat pump) installations have been validated as at 17 December 2018. This is an 8 per cent increase compared to the same time last year. Overall, we expect installations to remain broadly consistent with previous years. Of the 53,230 systems:

  • 35,776 are solar water heaters, a 7 per cent increase
  • 17,454 are air source heat pumps, an 11 per cent increase.

The increase in the number of STCs created is being driven by increases in installations and capacity. This growth offsets the impact of the decline in the deeming period. STCs creations are occurring more quickly with 80 per cent of STCs being created within 30 days of installation.

For more information on supply and demand dynamics in the Small-scale Renewable Energy Scheme please see our previous market updates or the Small-scale Renewable Energy Scheme page.

References

  1. Data sourced from TFS Green.

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