Marco Stella, senior broker, environmental markets, at TFS Green Australia and co-founder of The Renewable Energy Hub provides a snapshot of Australia’s clean energy market. All information is correct as of 24 August, 2022.

Large-scale Generation Certificate (LGC) market

After somewhat of a pause across June and July, the upward momentum in the LGC market that started earlier in the year continued in August, with a substantial move higher taking place across the curve.

The front end has seen most of the gains in recent months, primarily due to perceptions of a tighter supply/demand outlook in the near term. This happened despite confirmation from one of the major liable parties that they would be going ahead with a significant shortfall strategy for this year.

At the time of writing, spot LGCs were trading at $55.50, up $5 from June. The forward market has also continued to see gains as the narrative of increased voluntary LGC participation continues to resonate among traders. The Cal 23s reached $55, while Cal 24s sat at $48.

Small-scale Technology Certificate (STC) market

All evidence so far continues to suggest the 2022 Small-sale Technology Percentage (STP) was overestimated, despite a recovery in weekly STC submissions seen across the middle of the year. The clearing house remained in deficit across all Q2 and spot market activity remained subdued.

During August, several spot trades were seen, agreed sporadically at $39.90. However, the forward market has been more active, with participants looking to hedge their future price exposure. Multiple forward strips traded for 2023, most recently around the $39.60 level. Yet there has also been a handful of 2024 STC strips trade at the $39 level.

In the weeks ahead, the market will be closely watching to see if a significant spike in the supply of STC emerges in the latter part of the year, spurred by concerns about electricity price increases.

Energy Efficiency Markets (VEECs and ESCs)

The VEEC market was stunned at the end of June by the extraordinary decision by the Minister for Energy to reduce to zero the number of VEECs per install from the dominant refrigerated display cabinet activity, effective immediately.

A full review of the activity will be undertaken with the outcome to be finalised by early 2023.

The market rallied to a high of $81.25 on the back of the announcement, however since then the market has softened steadily back to the $68 level at the time of writing.

In the ESCs, the price action has been relatively stable in comparison, trading in the low $30s, with the spot reaching a high of $33.75 and a low of $31.50 across the period. ESC registrations were strong in June once again this year with the passage of the cut-off date for activities carried out in 2021, with circa 900,000 approved for the month.

Since then, the creation numbers have been steady with lighting activities continuing to contribute more than 50 per cent of creation.

The above information has been provided by TFS Green and relates, unless otherwise indicated, to the spot prices in Australian dollars as of 24 August, 2022.

Marco Stella is senior broker, environmental markets at TFS Green Australia and co-founder of The Renewable Energy Hub. The TFS Green/Renewable Energy Hub team provides project and transactional environmental market brokerage and data services across all domestic and international renewable energy, energy efficiency and carbon markets.

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