Market health

Large-scale generation certificate spot prices, supply and demand dynamics as well as liability shortfall are discussed in relation to the outlook from now to 2020. The availability of certificates and the price paid reflects the efficient functioning of the market.

On balance the indicators highlight that the appropriate signals have been provided to the market and these are eliciting the required response. The slow start to new project announcements means that certificate supply will be tighter. This is reflected in the high spot price, which then incentivises more project commitments. This in turn should improve the outlook for supply and help moderate certificate prices in time. The 2020 Renewable Energy Target can still be met even if certificate spot prices remain high along the way.

Table 3: Market indicators in 2016
Indicator	Description	2016 progress	Assessment
3. Large-scale generation certificate spot price	The 12-week average of large-scale generation certificate spot price as at the end of the 2016 calendar year.	$87.80³⁹ (12-week average price)	The positive price signal to the market is in excess of the price required to finance new build. The spot price remains well below the post-tax shortfall charge of $93.
4. Supply and demand dynamics	Registered large-scale generation certificates available after the surrender date of 14 February 2017 and concentration of holdings.	A total of 13.4 million large-scale generation certificates available after 2016 surrender.	Sufficient large-scale generation certificates are available for the 2017 compliance year. Supply and demand will be tightly balanced in 2018.
5. Shortfall	Proportion of Large-scale Renewable Energy Target liability for which the shortfall charge has been incurred.	A total of 10.4 per cent of the Large-scale Renewable Energy Target liability incurred a shortfall charge.	The majority of electricity retailers fully surrendered large-scale generation certificates. Two large retailers chose to pay the shortfall charge for a material amount citing the high spot price. Those that planned ahead and have contracts to obtain the required certificates are unlikely to have been affected by the high spot price.