Higher STC Target for 2012 results in higher STC price

17 Aug 2011

The Office of the Renewable Energy Regulator (ORER) recently released their non-binding estimate of the STC target for 2012 of 38.5 million. This incorporated an estimate of 18.4 million for STCs to be created in 2012 and includes 20.1 million for the expected surplus STCs at the end of 2011.

ACIL Tasman was commissioned by the ORER to develop projections for the expected STC target for 2012 and 2013. These are non-binding and merely provide the market with an indication of the expected demand for certificates over the next few years. We expect that the ORER will publish actual binding targets for next year before the end of December this year.

The expected significant increase in the target for next year had the impact of supporting the STC price and we saw wholesale STC prices increase several dollars over the course of the week. Increased confidence of the likelihood of a robust target for 2012 has helped underpin market confidence and a higher price. There still remains a significant oversupply over STCs (currently 15 million) which will continue to grow to more than 20 million by years end. This supply overhang will ensure that clearing house does not operate in any meaningful way for another 12 month or more.

The target for 2012 of 18.4 million implies an installation rate for the year of around 150,000 systems which is less than half of the 310,000 systems expected to be installed in 2011. We tend to think that this estimate is low and we are likely to see more systems installed in 2012 than ACIL Tasman are expecting.

For further information please refer to http://www.orer.gov.au/new.html