STC Demand Expected To Increase In 2018

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Given the huge increase in rooftop solar installations in Australia this year, the Clean Energy Regulator expects the small-scale technology percentage to increase in 2018, boosting STC demand.

Small-scale Technology Certificates (STCs) are created when an eligible rooftop solar power system or other small-scale renewable energy system is installed.

STCs form the basis of Australia’s major solar subsidy, reducing the up-front cost of installing solar panels. The value of these certificates varies on the open market* depending on demand, which in turn affects the pricing of solar power systems. The maximum value of an STC is $40.

Earlier this year, the value of STCs plummeted to well below $30, putting upward pressure on solar prices and catching many installers by surprise . However, the situation has improved dramatically since that time. The most recent STC spot price posted by Green Energy Markets (December 14) was $38.45.

The following graph shows STC surplus/deficit and spot prices from 2011 (Source: Clean Energy Regulator)

In its latest Small-scale technology certificate market update, Australia’s Clean Energy Regulator notes 146,000 small-scale solar panel systems have been installed so far this year, with a collective capacity of 887 MW. This represents a 33 per cent increase in installations compared to the same time in 2016 and a 49 per cent increase in capacity. This year’s result reverses what had been a gradual downward trend since 2013.

The Clean Energy Regulator says current projection points to installation capacity during this year reaching approximately 1.05 GW, making 2017 the highest installation year on record. The previous record was set in 2012 (1.035 GW).

This year’s results are expected to impact on next year’s small-scale technology percentage.

“Owing to the high rate of STC creation so far in 2017, the 2018 small-scale technology percentage is expected to materially increase, which will increase demand for STCs next year,” says the Regulator.

“Expected” doesn’t mean this will definitely occur – that decision is made by the Minister for the Environment and Energy (currently Josh Frydenberg).

The 2017 small-scale technology percentage is 7.01% (12.4 million STCs). The Clean Energy Regulator has estimated it will need to be 8.06% next year (14.6 million certificates).

The percentage for 2018 will be set by March 31.

*The other market is the STC clearing house where certificate prices are set at $40, exclusive of GST. When there is a surplus in the clearing house, as is currently the case, sale of certificates can be delayed.