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Large-scale generation certificate market update

23 January 2018

This market update gives the Clean Energy Regulator’s view on progress towards the 2020 target and key factors that may impact future large-scale generation certificate (LGC) supply and demand.

Key current market observations

  • The 2020 Renewable Energy Target will be met with more than 6500 megawatts of new capacity firmly announced (we said 6000 megawatts was needed) and financing activity still ongoing. More than 4900 megawatts of this is either fully financed, under construction or already commissioned.
  • 2017 was a record year with more than 1000 megawatts of new renewable energy projects accredited. We expect about 2600 megawatts to be accredited in the 2018 calendar year.
  • The number of LGCs required for surrender in both 2017 and 2018 is likely to be approximately one million certificates lower in each year than the legislated headline target in the Renewable Energy Electricity Act 2000. This is a result of normal adjustments required under the legislation, including to account for previous target exceedance.
  • We expect there to be about 33 million LGCs in the REC Registry prior to the 2017 surrender on 14 February 2018, with surrender obligations of approximately 25 million LGCs. Hence, following the 2017 surrender there is likely to be a surplus of about eight million LGCs in the market if liable entities fully surrender the estimated number of certificates.
  • If some liable entities pay the shortfall charge for 2017 (as occurred in 2016), an equivalent number of LGCs will remain in the market and will increase the level of surplus; with a potential transfer of demand into later years, when shortfall charges may be redeemed.
  • Liable entities can surrender certificates for more than 90 per cent of their obligations and carry forward the balance as shortfall without paying the shortfall charge. This may also increase the level of surplus and transfer demand to future years.
  • Considering the above, it is our view that the LGC market will continue to remain in surplus through to 2020.
  • There remains a significant difference between spot LGC prices and the prices of bundled power purchase agreements (PPAs).

For more information see Large-scale generation certificate market update.

Large-scale Renewable Energy Target market data

We have also released the latest market data on the Large-scale Renewable Energy Target.

The data includes the latest December 2017 figures for LGC supply and demand.


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