What’s driving the rate of STC creation?

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The rate of creation of small-scale technology certificates has been over 1 million each week. But how sharply will creation rates fall after June 30?

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Recent STC price falls have been attributed to continued strong creation of certificates from PV. Over the past three weeks, STC creation has been over 1 million certificates each week. With the solar multiplier dropping from three to two on 1 July, we can expect that creation will remain around these levels until early July. What is difficult to determine though, is how sharply creation rates will fall after 30 June.

Before we try to answer that question, we need to analyse certificate creation by state, as we have in the Figure 1 below.

Figure 1: Weekly STC creation by state

This chart starkly demonstrates the impact that Queensland is having on creation levels, which has increased from 30% of total monthly creation at the end of 2011 to more than 40% for some weeks in May and June 2012. The surge in certificate creation in Queensland can be attributed to the feed-in tariff of 44 cents per kWh. This attractive feed-in rate combined with the impending multiplier reduction has resulted in ever increasing weekly creation rates. Other states have also seen an increase in weekly creation, especially over the past four weeks, but nowhere to the extent of Queensland.

We would expect that the majority of states will see a reduction in certificate creation after June – but what about Queensland which will continue to have an attractive feed-in tariff? In answering this question, South Australia’s experience could prove instructive. Up until the end of September 2011, South Australia had a feed-in tariff of 44 cents per kWh, which was reduced to 16 cents per kWh in October. South Australia’s monthly STC creation levels can be seen in Figure 2.

Figure 2: Monthly STC creation in South Australia

In viewing this chart it must be remembered that there is a time lag between the installation of a system (which is the determinant of the level of solar multiplier received and the rate of feed-in tariff) and the month in which the certificates are created. What this chart tells us is that after the solar multiplier reduced from five to three on 1 July 2011, certificate creation levels remained relatively strong. It was only after the feed-in tariff reduction on 1 October that a significant, sustained reduction in certificate creation was experienced. It should be noted that due to the notice period given for the reduction in the feed-in tariff, a rush to install systems was experienced in South Australia, similar to what we are seeing around the country in the lead up to 1 July when the multiplier reduces.

South Australia demonstrates that while the upfront benefits of the higher multiplier are well understood, PV system owners are also well aware of the longer term benefits that a generous feed-in tariff can provide and are willing to make a greater outlay (compared to what would have been required in previous months) in order to secure a feed-in tariff. Assuming the Queensland feed-in tariff remains unchanged, we would expect to see reasonably strong certificate creation in Queensland after June.

This article was originally published on the Green Energy Trading blog. Reproduced with permission.

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3 Comments
  1. David Rossiter 7 years ago

    Good paper Ric. But life is not quite so bad as it might appear perhaps feed in tariffs diminishing is not the only part of the PV STC story.

    Three other issues should also be driving rates of installation of solar PV systems.

    Firstly the substantial fall in costs for PV components in recent years due to better manufacturing methods and increased worldwide demand leading to economies of scale. Costs have dropped to less than third in the last five years – some would say substantially more….

    Secondly the large increases in retail electricity prices we have seen in recent years mostly due to network costs. (NSW electricity costs have risen from 16c/kWh to 37c/kWh in the last five years – of which about 2c only is due to carbon pricing.)

    Thirdly the changing demographic as the baby boomers start retiring, collecting their super as they go past go and wonder how they can best utilise capital to reduce their future living costs in an investment environment where shares are dropping in price and interest rates are low. PV has crossed many minds as a good investment for retirement.

    So what will happen after July 1 to solar PV.

    I suspect now that it is a mainstream technology PV installation rates won’t die. There will be a dawning that electricity is more expensive, PV systems are cheaper and easily installed and actually they make sense as an investment.

    A PV system that had a simple payback of 44 years when it was installed five years ago – if it were installed now has a payback of about six years. In other words PV was not an investment then but it is now!

  2. Dan 7 years ago

    Is there a direct relationship between STCs and MW of PV installed?

    Is there a source that regularly publishes monthly installation data for PV?

    Where do you get your STC stats?

    Thanks for any help.

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