VEEC Pricing Uncertainty
18 Jan 2012
The wholesale market price for VEECs (parcel sizes of 5000 certificates) has risen from around $31 at the start of October. In December the price peaked at over $40 before dropping back to $37.75 in early January. With two weeks remaining to create certificates for the 2011 compliance year (all certificates created by 31 January can be used for 2011 compliance), the market was still short over 400,000 certificates of the 2.7 million target.
Throughout much of 2011, the energy efficiency industry in Victoria had been waiting for the approval of a new energy efficiency product; Stand-by Power Controllers (SPCs). By automatically, turning appliances on standby off completely (as though it had been switched off at the wall) SPCs have the ability to make a significant contribution to reducing households power bill and in doing so, create a significant number of VEECs. Despite the early shortfall in VEEC creation, it was believed that SPCs would create sufficient VEECs to meet demand. This was the reason for the extended period of low prices during the period of low certificate creation. SPCs started creating VEECs in September. After initial low levels, creation levels have picked up considerably, to such a rate that the target may still well be met.
While 2011 may well be undersupplied and prices remain high until the surrender date on 1 April, prices for 2012 compliance year certificates are less certain. The government has announced that the VEEC target for 2012 will be doubled, but the scheme is also being opened to small and medium businesses meaning that there will be a much larger pool of potential certificate creators. Initially, businesses will be able to create certificates under most of the activities which households can create certificates however the Department of Primary Industries is currently investigating additional activities which might apply to businesses in the future. The upshot of this is that it would take an act of great bravery to predict what next year’s VEEC creation levels will be. It may well be that prices ease in early 2012 until the market has an understanding of what the major sources of VEECs will be for the year and the likelihood that there will be sufficient certificates to meet the annual target.
Manager Environmental Markets