After several years of volatility the Small-scale Technology Certificate (STC) market is now tracking to target. Falling electricity demand over 2012 and 2013 will result in fewer STCs being surrendered by Liable Parties for that period. As a result, the surplus of certificates in the market is higher than expected.
Having reached the end of 2013 Green Energy Trading has assessed how the solar industry has performed in meeting the 2013 STC Target. The Small-scale Renewable Scheme (SRES) comprises a self-correcting target where the target is determined based on an estimate of the likely level of STCs to be registered for the year adjusted for any surplus or deficit from the previous year. The STC target for 2013 was 35.7 million STCs which comprised an estimate of 20.7 million to be registered in 2013 together with 15 million surplus STCs carried forward from 2012.
STC registration on target
A total of 21.09 million STCs were registered through 2013, slightly more than the estimated level of registrations of 20.7 million that was incorporated into the 2013 STC Target. The STC target setting process for 2013 was on track with only a two per cent error margin. Removal of the Solar Credits Multiplier and phasing out of state feed-in tariffs served to reduce the volatility in solar PV installations which had made estimating previous year’s targets difficult.
The level of weekly STC creation for 2013 (Figure 1) was fairly stable throughout the year. Registrations were higher for the first half of the year with the phase-out of the Queensland Solar Bonus Scheme.
Level of surplus STCs
A total of 108.94 million STCs were registered at the end 2013. Of these:
- 71.34 million were surrendered to meet the 2011 and 2012 targets; and
- 35.70 million are expected to be surrendered to meet the notional 2013 target.
This leaves 1.90 million registered STCs surplus at the end of the 2013 year that should be carried forward into the 2014 target.
Less STCs surrendered due to falling electricity demand
The combined targets for 2011 and 2012 were 72.786 (28 million + 44.786 million respectively) however only 71.34 million STCs have actually been surrendered. This means that 1.45 million fewer STCs have been surrendered than required. Liable Parties need to surrender STCs in proportion to their electricity sales. This proportion is defined as the Small-scale Technology Percentage (STP) and is set at the beginning of each year. There has been a reduction in electricity demand over recent years and this has resulted in less STCs being surrendered.
A total of 29.63 million STCs have been surrendered in 2013 to meet the combined first, second and third quarter targets of 30.35 million. This leaves a deficit (or under-surrender) of 0.72 million STCs. Some of this will be picked up in the fourth quarter full year adjustment. There will however be an under-surrender of STCs for 2013 due to reduced electricity demand in 2013 and this is likely to be in the range 0.3 to 0.7 million STCs.
The surplus that gets carried forward into 2014 is estimated to be 1.9 million, however the surplus the market sees is higher than this as:
- There is likely to be an under-surrender of STCs in 2013 due to falling electricity demand (between 0.3 and 0.7 million STCs); and
- There were 1.26 million STCs that were pending registration at the end of 2013, most of which are expected to be approved and available in time to be used to meet the 2013 fourth quarter surrender requirement by 15 February 2014.
- The surplus of STCs then becomes 3.66 million STCs. Of these 1.23 million were lodged in the Clearing House.
Outlook for 2014
The Government is expected to announce the STC target for 2014 in the coming weeksmonth or so. The level of solar installations assumed for 2014 and the manner that the under-surrender of certificates is accounted for will determine how the market responds.
The scheme is now working as it was intended with the supply of certificates in line with the target. We can also expect that sometime in 2014 the Clearing House will start to be used by Liable Parties and that a significant portion of the 1.23 million STCs currently queued will be settled.