STC target to 1140 MW of solar PV
The Clean Energy Regulator announced on Thursday 29 March 2018 that the 2018 target for the Small-scale Renewable Energy Scheme, which provides financial support to rooftop solar PV and solar hot water, is to be 17.08% (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 2018.
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 17.08% equates to an annual target of 29.3 million STCs which electricity suppliers need to surrender to the Regulator. This target includes an adjustment of 7.2 million STCs which represents the level of STCs available that was in excess of those surrendered by Liable Parties. The estimate of STC registrations expected for 2018 is 22.1 million STCs which is equivalent to 425,000 STCs created each week.
The 22.1 million STC estimate for 2018 equates to an effective level of solar PV installations of 1140 megawatts in 2018 plus approximately 67,000 solar water heating systems. For solar PV this amounts to a 3% increase compared to the 1106 MW estimated to have been installed in 2017.
The Clean Energy Regulator has also released the indicative targets (termed ‘non-binding’) for 2019 and 2020 of 20.8 million and 19.8 million respectively. We estimate that these will require 1153 megawatts of solar PV in 2019 and 1195 megawatts in 2020.
The reason why the megawatts required don’t decline in line with the number 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. In 2018 the period that solar PV systems can create STCs drops from 14 years down to 13 years and it will drop to 12 years in 2019 and 11 years in 2020.
How was the Target arrived at?
The Clean Energy Regulator appointed three consultants, ACIL Allen, Green Energy Markets and Jacobs to develop estimates for the likely level of certificates to be registered in 2018. The consultants’ reports can be found at:
The consultant’s estimates of the level of STCs to be created in 2018 range from 21.5 to 23.7 million.
The Regulator has used an estimate for 2018 creation of 22.1 million (based on the consultants projections) and then increased this amount by 7.2 million which represents the number of STCs registered that exceeded the STCs that have been surrendered by Liable Parties. Further information is provided at:
Market so far in 2018
So far in 2018 STC creation has been tracking at 508,000 per week which is 20% higher than the implied weekly target of 425,000 (excluding the surplus from 2017).
The spot STC price increased by $1.15 following the announcement of the 29.3 million Target. The market appears to have been expecting a lower Target and responded positively to the announcement.
If the current rate of STC creation continues to the end of 2018 then we estimate that a surplus of between 4 and 5 million STCs will result. This will be consistent with nearly 1400 MW of PV installations for 2018.
