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Regulator sets rooftop solar target of 760MW for 2016

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The Clean Energy Regulator announced on March 15 that the 2016 target for the Small-scale Renewable Energy Scheme, which provides financial support to rooftop solar PV and solar hot water, is to be 9.68 per cent (this is called the Small-scale Technology Percentage or STP). Green Energy Trading has assessed what this means for the level of solar expected to be installed in 2016.

The STP represents the percentage of an electricity supplier’s sales for which it needs to acquire and surrender Small-scale Technology Certificates (STCs) to comply with the Renewable Energy Target legislation.

This then acts to support the installation of solar PV systems because these systems are eligible to create an STC for each megawatt-hour of electricity they are expected to generate over a 15 year lifetime. Electricity suppliers are willing to pay up to $40 for each STC, which then provides a rebate off the cost of solar systems.

The STP of 9.68 per cent equates to an annual target of 16,957,024 STCs which electricity suppliers need to surrender to the Regulator. However this needs to be adjusted for the fact we fell short of last year’s target by 64,476 STCs, so the real target for STC registrations for 2016 is 17.02 million STCs which is equivalent to 327,000 STCs created each week.

We estimate that this effectively equates to a demand for 760 megawatts of solar PV in 2016 plus approximately 60,000 solar water heating systems.

For the target to be met an increase in installed solar PV capacity of 6.6 per cent is required compared to the 713 MW estimated to have been installed in 2015.

The Clean Energy Regulator has also released the indicative targets (termed ‘non-binding’) for 2017 and 2018 which we estimate will require 752 megawatts of solar PV in 2017 and 744 megawatts in 2018.

Historical solar PV capacity installed and targets for 2016 to 2018

Historical solar PV capacity installed and targets for 2016 to 2018

The amount of STCs required are 15.96 million STCs in 2017 and 14.86 million for 2018. The reason why the megawatts required don’t decline in line with the amount of certificates is because the RET legislation limits the period over which a solar system can create STCs for its future generation to no longer than the end of 2030. So in 2017 the period that solar PV systems can create STCs drops from 15 years down to 14 years and it will drop to 13 years in 2018.

How was the Target arrived at?

The Clean Energy Regulator appointed two consultants, ACIL Allen and Green Energy Markets to develop estimates for the likely level of certificates to be registered in 2016. These are based on a forecast of what solar installations are likely to be assuming solar systems benefit from an STC rebate equal to a value of $40 per certificate, minus some administrative and transaction costs to create them.

The consultants’ reports can be found at http://www.cleanenergyregulator.gov.au/RET/About-the-Renewable-Energy-Target/The-certificate-market/The-small-scale-technology-percentage/The-current-small-scale-technology-percentage/Small-scale-technology-percentage-modelling-reports

The 2016 target of 17.02 million STCs is approximately an average of the estimates developed by the consultants. A summary of the consultants’ estimates is summarised in the table below.

Screen Shot 2016-03-24 at 1.31.19 PM

However so far in 2016 the level of STC creation has been tracking behind the target level. As a result the Clearing House remains in deficit and is likely to be used extensively through the course of 2016.

Ric Brazzale is chief executive of Green Energy Markets.

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