STC price rise short-lived

13 May 2011

Following the announcement by the Australian Government on Thursday 5th May 2011 that the Solar Credits Multiplier will be reduced to 3 on 1 July 2011, the wholesale STC price (parcel size of 5000 or more) increased from around $25 to $29 before settling $27 at the end of that week.

The STC price has continued to fall and reached around $25 this week. The level of STCs registered with the regulator continues to track at more than 1 million per week. At this rate of registration more than enough STCs will be registered by the end of next week to meet the second quarter target. More importantly, enough certificates will be created by early August to meet the 28 million annual target.

The target for 2012 will be adjusted to take into consideration any surplus this year so the supply / demand balance will come back into alignment by the end of 2012. The challenge in the short term is that the surplus needs to be absorbed by the market and the price will fall to a level that will induce electricity retailers and other parties to purchase and hold STCs into 2012. Only time will tell whether $25 becomes the floor price, but we would expect the market will need to see the level of STCs submitted start to fall before any meaningful recovery in price takes place.