Marco Stella, co-founder of CORE Markets, provides a snapshot of Australia’s clean energy market. All information is correct as of 15 December, 2022.
Large-scale Generation Certificate (LGC) market
November 2022 saw the release of the Clean Energy Regulator’s long anticipated Quarterly Carbon Market Report, with market participants taking note of the single largest quarter of voluntary cancellations to date, at 4.7 million, putting voluntary cancellations back on track to reach the Clean Energy Regulator’s estimate of eight million for the year.
However, despite the large voluntary cancellations, it is clear we will see a surplus to the tune of seven million LGCs for the year. Perhaps as a reflection of this, prices ultimately softened across the curve during November and into December, with the market at the following levels at the time of writing:
- Spot: $64
- Cal 22: $65
- Cal 23: $58.50
- Cal 24: $45.75
- Cal 25: $40.25
- Cal 26: $38.75
- Cal 27: $33.25.
Small-scale Technology Certificate (STC) market
While STC creation numbers continued to pick up approaching the end of 2022, they have not yet managed to make a material impact on the clearing house deficit. At the time of writing, the clearing house remains in deficit upwards of four million certificates.
Accordingly, activity in STCs has remained somewhat subdued in the spot, which has been ticking over at $39.90 in patchy trading, usually the result of sellers requiring quicker settlement from the market than the clearing house can provide. However, there has been a pickup in forward contract trades. Strips covering various periods across 2023 have traded between $39.55 and $39.85.
Energy Efficiency Markets (VEECs and ESCs)
VEECs have continued to see relative stability, with the spot price ranging from $72 to $74.75 across November 2022, and drifting back towards the $72 level by mid-December, with an increase in spot selling interest likely a result of business operators looking to secure cash before the holiday season.
As the end of the year approaches, the forward activity has also seen selling at lower levels despite 1 February, 2023, looming when the removal of residential lighting and the primary source of commercial lighting will combine with a substantial reduction in the scheme’s emissions factor to reduce supply.
The ESC market has also continued to soften, trading from $35 to $32 across November, dropping further to $30 in December, where it remains at the time of writing. The price movements have coincided with consistent large weekly creation figures, in excess of 200,000 ESCs per week for the first two weeks of December.
The above information has been provided by CORE Markets and relates, unless otherwise indicated, to the spot prices in Australian dollars as of 15 December, 2022.
The Renewable Energy Hub has recently acquired the TFS Green APAC business, and the combined entity has been rebranded as CORE Markets, an end-to-end markets, technology and climate solutions partner for business. Marco Stella is a co-founder of CORE Markets.