STC waiting game: What it could mean for the solar industry

The next 10 days could be a very interesting time for the residential solar industry. STCs are firming daily, which means that liable entities are getting spooked that the market supply of STCs is shrinking. It is getting more and more likely that, if not this time around, next time a good amount of STCs will come from the clearing house.

Seventy-five per cent of all STCs sitting in the clearing house are from 2011. These are obviously now long-term nest eggs, many belonging to, or held by, ANZ bank. There is a mere 638 STCs sitting in the 2014 pile.

In general, it looks like STCs are being cycled into cash flow immediately by the solar companies. There seems to be a significant delay in approving STCs by the Rec Registry, which leads me to a possible scenario. At this point it is TOTALY HYPOTHETICAL.

This is the scenario:

The Rec-Registry drags their feet in approving STCs, probably due to the holiday season, which creates a perceived throttle in the supply chain when a surrender period is upon us. Where there would be a constant inflow of STCs into the market, there suddenly doesn’t look like there will be enough, so those who usually wait for a peak are now buying up at what they consider a premium.

As these buyers continue to buy at these high prices, the supply remains throttled. Just before the surrender period ends, the buyers find themselves short and hit the clearing house, the clearing house dips into deficit. Instantly, the clearing house is closed by the Abbot government, removing the $40 guarantee on STCs, the government has discharged it’s $40 obligations to those in the clearing house.

Once the clearing house and the ceiling (or floor depending on who you are) is gone, the government announces a moratorium on STC surrender quotas subject to the outcome of the RET review. Those still holding STCs scramble to off-load them and the price plummets, with no guarantee that they will be worth anything in future. Solar companies using STCs as a discounting tool will have no way of knowing what they will get for them, so can’t offer prices as they used to because the market is in complete flux.

This is a way to kill off the residential portion of the renewables market without stopping it overnight. It will basically be a complete gamble for the solar industry, who will cannibalise themselves. This makes way for the government to facilitate the free passage of large-scale developers, who will do exactly what the government instructs them to. Thus, the government can control the whole RET agenda, creating any figures it likes under a veil of secrecy with only a handful of players.

Again this is completely hypothetical, but if I was holding STCs, and they weren’t in the clearing house for safekeeping, I would be putting them in TODAY. Given the Abbott government’s rhetoric on small scale renewables, this scenario may become fact, not from evil intentions, but it seems to be a plausible methodology.