100 per cent compliance in RET first quarter surrender
Friday, 28 April 2017 marked the end of the first quarter (1 January – 31 March) under the Renewable Energy Target, and was the final date for liable entities to surrender small-scale technology certificates (STCs) against their calculated required surrender amount. For the first quarter, a 100 per cent compliance rate for surrender of STCs was achieved.
Each year the Clean Energy Regulator sets the number of certificates that need to be surrendered through the small-scale technology percentage. In 2017 the small-scale technology percentage is 7.01 per cent which means approximately 12.4 million STCs will be surrendered throughout the calendar year.
The position of the STC Clearing House immediately after surrender gives the best view of certificate liquidity. With the aim for supply and demand to be roughly in balance, the STC Clearing House provides important liquidity for the market, which at times will not have enough STCs for all the liable parties to purchase to meet their obligations.
The 2017 first quarter surrender period has left the STC Clearing House in deficit. The STC Clearing House goes into deficit when there are no STCs available for sale in the STC Clearing House. When this happens, the Clean Energy Regulator creates 'Clean Energy Regulator created STCs’ for buyers to purchase. In 2016, we created 13.7 million regulator created STCs.
In the first quarter of 2017, an increase in creations of STCs resulted from both a surge in installations at the end of 2016; ahead of the deeming period decline that came into effect on 1 January 2017, and an increase in installations this year. Despite this increase in creations, the STC Clearing House remains in a substantial deficit.
If the high rate of STC creations continues, at some stage this year the STC Clearing House may not be needed to provide liquidity as there will be enough STCs available in the market. This is good news, as a vibrant secondary market is beneficial. Like many commodity markets, the STC market needs a reasonable operating surplus of certificates above the statutory demand so that buyers can get the volumes they need, as some sellers may wish to hold their STCs.
It is too early to determine whether a material surplus of STCs could eventuate. If a certificate surplus results later this year or early in 2018, it will be corrected as part of the normal adjustments required for the 2018 small-scale technology percentage.
The Clean Energy Regulator is committed to providing relevant and timely Renewable Energy Target information to the market to increase transparency and provide access to up-to-date information. This includes the new monthly update of market data for the Large-scale Renewable Energy Target and Cracking the small-scale code, a snapshot of small-scale renewable energy system installations.