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Executive summary

An important year for Australian Carbon Credit Units (ACCUs)

The 2022 calendar year was a defining year for the ACCU market. Significant developments included the Independent Review of Australian Carbon Credit Units (the Review), the proposed reforms to the Safeguard Mechanism and the fixed delivery milestone exit arrangement for Commonwealth carbon abatement contracts.

The reported generic ACCU spot price varied considerably during the year, starting at $51 and ending at $33.80 with reported spot market trading volume in 2022 about 5 times greater than in 2021.

The Review was released on 9 January 2023. It concluded the current ACCU scheme is essentially sound. The Review made 16 recommendations to enhance confidence in the integrity and effectiveness of the scheme. The Australian Government accepted all 16 recommendations in principle.

On 10 January 2023, the Australian Government released the proposed design rules for the reforms to the Safeguard Mechanism for consultation. The proposed reforms will require Australia's largest emitting facilities to reduce their emissions in line with Australia's national emissions target (43% below 2005 levels by 2030), to deliver an estimated 205 million tonnes of abatement by the end of the decade compared to emissions without these reforms.

The market responded positively to these events. The reported spot generic ACCU price increased from $34.50 to $38.50 in the following 2 weeks. Reported spot and forward trading volumes were 3.2 million in this 2-week period. This is 2.5 times greater than the previous 2-week volume record.

Other key market highlights for ACCUs in 2022 include:

  • 17.7 million ACCUs were issued, up by nearly 700,000 from 2021.
  • Project registrations increased by 385 to 1,434.
  • 1.5 million ACCUs were cancelled against non-Commonwealth demand, a 56% increase compared to 2021.

Key events for the ACCU market later in 2023 include legislation before parliament on the Safeguard Mechanism reforms and rule changes, as well as ongoing development of the proposed Australian Carbon Exchange. Key dates include:

Chapter 1 includes important market data on ACCUs, including our estimates for 2023 which suggest modest ACCU supply growth in the short term.

Strong increase in renewables investment

The second half of the 2022 calendar year saw a material increase in investment in wind and solar power stations and rooftop solar:

  • 4.3 gigawatts (GW) capacity of wind and solar power stations reached a Final Investment Decision (FID) in 2022. This is up from 2.9 GW in 2021, with 60% of the capacity announced in the second half of the year (H2).
  • 2.8 GW of small-scale rooftop solar was installed for the full year. This exceeded our estimate of 2.3 GW earlier in the year.

The CER estimates total added capacity for small-scale rooftop solar in 2023 could reach or exceed the record of 3.2 GW in 2021 if the 2022 H2 trend continues. Supply chain constraints, particularly labour, may limit the installed capacity. Installation wait times are currently reported to be 3 to 5 months.

This turnaround in renewables investment in H2 is a great start for the government's goal of 82% renewables by 2030. Renewables generation in the National Electricity Market (NEM) averaged 35% for 2022, with Q4 averaging more than 40%. We expect renewables should average about 40% of NEM generation for the 2023 calendar year.

There were several factors contributing to the increase in large-scale investment. These include government policy/targets, proposed investment in large batteries and major grid upgrades, announcements of early exit of coal fired generation and high wholesale electricity and large-scale generation certificate (LGC) prices.

Higher retail energy prices contributed to the increase in rooftop solar in H2. The Australian Government's community batteries policies and ongoing announcements by states and territories will be important in enabling more rooftop solar installations in 2023.

According to AEMO's Q4 Quarterly Energy Dynamics report, the NEM had its lowest ever quarterly emissions (26.4 million tonnes carbon dioxide equivalent CO2-e) and emissions intensity (0.64 t CO2-e/MWh).

In Q4 2022, solar PV and wind set the price in 17% of Q4 intervals, up from 11% in Q3. Renewables setting the price in the last quarter of the year contributed to a material decline in average wholesale electricity prices, from $216 per megawatt hour (MWh) in Q3 to $96 in Q4.

Other key market highlights for renewables in 2022 include:

  • Total of over 5.3 GW of new renewable generation capacity added. 2.5 GW of large-scale wind and solar and 2.8 GW of small-scale rooftop solar.
  • LGC eligible renewable generation of 44,000 GWh in 2022, up from 39,000 GWh in 2021.
  • Voluntary cancellation of 7.4 million LGCs, an increase of 30% from the 5.7 million in 2021.
  • LGC spot prices grew strongly from $42.40 and reached a high of $70 before settling to $65 at the end of 2022. The spot price further declined to just over $50 in the first few weeks of 2023.
  • The market still has an effective deficit of 15.5 million LGCs to redeem all shortfall, both paid and carried forward.
  • The (Small-scale Technology Certificate) STC Clearing House remains in a material deficit of 4.7 million at the Q4 surrender date of 14 February 2023.

Chapter 2 includes in-depth market information and data on renewables, LGCs and STCs and our estimates for 2023.

Table ES.1: Certificate prices, Q4 20221
Certificate typeSpot price AUD (31 December 2022)Change over the quarter


1 Data sourced from Jarden and TFS Green.

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