Regulator reduces small-scale renewables target while solar sales take off

The Clean Energy Regulator announced on Tuesday 28 March 2017 that the 2017 target for the Small-scale Renewable Energy Scheme, which provides financial support to rooftop solar PV and solar hot water, is to be 7.01 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 2017.

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.

The STP of 7.01 per cent equates to an annual target of 12.5 million STCs which electricity suppliers need to surrender to the Regulator.

How was the Target arrived at?

The Clean Energy Regulator appointed two consultants, Jacobs and Green Energy Markets to develop estimates for the likely level of certificates to be registered in 2017. The consultants’ reports can be found here.

The consultants’ estimates of the level of STCs to be created in 2017 range from 13.7 to 16.0 million) and are set out in the table below.

The Regulator has used an estimate for 2017 creation of 15.15 million (based on the consultants’ projections) and then reduced this amount by 2.65 million which represents an estimate of STCs below all the previous years creation estimate. Further information is provided here.

Market currently on track to exceed the target in 2017

The rooftop solar market has experienced a major revival since November last year, reversing what had been a slow and steady decline in capacity installed since the withdrawal of premium feed-in tariffs and the STC rebate multiplier. Solar PV capacity and STC creation are tracking well above average levels for much of last year, as shown in the chart below.

This lift in STC creation is all the more remarkable given the drop in the amount of STCs that can be deemed from a solar PV system from 15 years to 14 years. So far in 2017 STC creation has been tracking at 365,000 per week which is 46 per cent higher than the implied weekly target set by the regulator of 250,000.

STC spot price and weekly creation relative to regulator target – Jan 2015 to March 2017

The Clearing House had been used extensively in 2016 (in deficit) with only several weeks early last year being in surplus. Given the low level of the 2017 target relative to creation levels the market is expecting that the Clearing House (with its guaranteed $40 per STC) will be used a lot less extensively in 2017 with forward STC prices for delivery later in 2017 having traded under $38.00.

Ric Brazzale is Managing Director, Green Energy Trading