Source: CER

The CER release STC Market Update

Current market observations

• 23% increase in system installations in first half of 2017.
• For the first time since 2015, the clearing house was in surplus at the end of a surrender period. When this happens, small-scale technology certificates (STCs) are mostly sourced from the open market for below $40. Participants who offer STCs for sale in the clearing house should expect a delayed sale.
• While there remains considerable uncertainty on whether or when a STC shortage may arise, it is unlikely to be before mid-2018. Prudent commercial measures may be necessary to manage exposure to price fluctuation.
• Due to the high rate of STC creation so far in 2017, the 2018 small-scale technology percentage is expected to increase, which should increase demand for STCs next year.

Analysis

In the first six months of 2017 there was an increase in the number of small-scale solar PV systems installed, reversing the gradual downward trend since 2013. There was a 23 per cent increase in the number of systems installed in the first half of 2017, compared with the same time last year. This is impacting the volume of STCs in the market.

The best view of STC supply and demand is immediately after a quarterly surrender. The second quarterly surrender for 2017 occurred on 28 July 2017, and for the first time since 2015 the clearing house was in surplus at the end of a surrender period. When this has occurred in the past, STCs have mostly been sourced from the open market and STCs have traded below $40.

Participants who offer STCs for sale in the clearing house should expect a delayed sale, as STCs are likely to remain there for a period of time, and until the supply in the broader market is diminished. While there remains considerable uncertainty on whether or when a STC shortage may arise, it is unlikely to be before mid-2018 as the first quarter surrender occurs on 28 April 2018.

For more information about the STC market, read our news item.