Skip Ribbon Commands
Skip to main content

Skip Navigation LinksExecutive-summary

CER branding swish

Executive summary

At the end of Q1 2022, metrics for the full calendar year were largely in line with expectations set out in the Q4 2021 report. Year on year comparison of first quarter data is not necessarily sufficient to call out trends, however the following Q1 metrics will be worth watching during the year:

  • ACCU voluntary cancellations 282,778 (up from 174,489 in Q1 2021)
  • LGC voluntary cancellations 1,216,230 (up from 358,473 in Q1 2021)
  • CER cancellations (international offset units) 2,639,875 (up from 1,599,141 in Q1 2021)
  • ERF project registrations 122 (up from 44 in Q1 2021)
  • renewable projects reaching final investment decision totalling 1.3 GW in Q1 (compared to 2.9 GW for all of 2021).

Information on Safeguard facilities was published in March with 419,315 ACCUs cancelled for the 2020-21 financial year, up from 246,539 for 2019-20.

The 14th ERF auction held early in Q2 on 5 and 6 April yielded a higher volume than the previous auction, with 7.6 million ACCUs for optional delivery contracted at an average price of $17.35.

On 31 March, the request for proposal for the Australian Carbon Exchange and new register was issued to the 13 shortlisted parties.1

Q1 saw significant media interest on exit arrangements for Australian Government ACCU fixed delivery contract milestones and as well as claims made about the ERF. Market analysis on this can be found in chapter 1.

The Clean Energy Regulator holds the view that the ERF is a world class offsets scheme that Australians can continue to have a high level of confidence in. The Clean Energy Regulator's responses to public statements on integrity are available here and Emissions Reduction Assurance Committee (ERAC) responses are available here.

Voluntary carbon market off to a very strong start in 2022

Participation in the Climate Active carbon neutral program underpinned a significant proportion of the increase in voluntary cancellations of ACCUs, LGCs and CERs in Q1.

LGCs had the largest year on year Q1 increase in both absolute numbers and percentage change. It is expected that GreenPower will have a big year with most cancellations occurring in Q3.

The Clean Energy Regulator expects total voluntary cancellations of units and certificates in 2022 will be a big step up from 2021 and likely exceed expectations from the Q4 2021 report. Full analysis of the voluntary carbon market will be published in the Q4 report as major cancellations typically occur in the second half of the year.

Record ACCU trading volumes in Q1

The total volume of ACCUs traded in the secondary market throughout Q1 2022 was 3.2 million, up from the previous quarterly record of 3 million in Q4 2021. Figure 1.1 shows how trading volume has been materially increasing over the past 2 years.

The volume of ACCUs traded in the reported spot market (a subset of the total trading numbers above) also hit a record at 940,000 in Q1, up from the previous highest volume of 400,000 in Q4 2021.2

Since the announcement of exit arrangements for Commonwealth contract milestones on 4 March and up until 28 March, there have been 13 reported spot market trades for a total of 290,000 ACCUs at a volume weighted price of $32.50. Further to this, in early May there were two options trades for 100,000 ACCUs each at a strike price of $35. Additionally, in late May there has been a material step up in spot price and volumes with larger differentiation of price for unit that have related co-benefits. Greater clarity may be seen on the price direction of reported trades in the next few months.

Market trading and the new Commonwealth fixed delivery contract milestone exit arrangements is discussed in depth in chapter 1.

Large-scale renewables investment continues the strength seen in H2 2021

In Q1 2022, 1.3 GW of additional large-scale renewables capacity reached final investment decision (FID. Full calendar year capacity in 2021 reaching FID was 2.9 GW with the majority of 2.1 GW in the second half of 2021. Both the Q3 and Q4 2021 reports stated an expectation that investment strength would continue into the first half of 2022, and the Q1 capacity is a good start to 2022.

FID decisions are driven by commercial processes and and can vary significantly from quarter to quarter. It is too early to say whether 2022 will be the third year in a row that total FID capacity increases. There are many signals for investment including announcements of coal plant closures being brought forward, LGC spot prices—finishing Q1 at $48—and wholesale electricity prices increasing.

Further analysis on how large-scale renewables has and is responding to investment signals is available in chapter 2.

Reduction in new rooftop solar capacity as expected

The Q4 2021 report signalled that 2022 would likely end the 5-year trend of increasing annual rooftop solar capacity investment, and predicted the STC Clearing House would see material use for the first time since 2017. This was realised over Q1, with 2.9 million regulator created STCs purchased through the clearing house in the lead up to the 2022 Q1 surrender on 28 April.

The installed capacity in Q1 this year was 561 MW, well below the 782 MW in Q1 2021. The Clean Energy Regulator believes, on current trends, the installed capacity for 2022 will be approximately 2.3 GW, well below the record 3.2 GW in 2021. This estimate is explained further in chapter 3 along with our analysis of likely reasons for the slowing in rooftop solar installations.

Table ES.1 Certificate prices3, Q1 2022
Certificate typeSpot price AUD (31 March 2022)
Change from previous quarter
ACCU$30.50-$20.50
LGC$48.00+$4.00
STC$39.90+$0.95

Footnotes

1 This is the procurement stage and tenders are expected by 27 June 2022. Information is available here.

2 Some intermediaries report trades with volume and price.

3 Data sourced from Jarden and TFS Green


Documents on this pageDocuments on this page

Was this page useful?

LEAVE FEEDBACK
preload-image-only preload-image-only preload-image-only preload-image-only preload-image-only preload-image-only preload-image-only preload-image-only preload-image-only