CORE Markets Head of Carbon and Renewable Markets Marco Stella provides a snapshot of Australia’s clean energy sector.
Large-scale Generation Certificate (LGC) market
The final quarter of 2024 brought significant volatility to the LGC market, with November marking a dramatic low point. Spot prices plummeted by more than $10.00 within a single week in the middle of the month, reaching a decade low of $25.00—levels not seen since 2014. However, by early December, prices showed signs of recovery, climbing back to $34.25 before stabilising in a range between $30.00 and $34.00. At the time of writing, the spot market was trading at $31.00
The broader forward curve mirrored these movements, with Cal24 through Cal28 contracts experiencing sharp declines in November before steadying in December. At present, the curve is as follows: Cal25s at $32.50, Cal26s $26.35, Cal27s $21.50 and Cal28s $19.00.
While the rebound in prices offers a glimmer of hope, the underlying market dynamics remain largely unchanged. The CER’s market data continues to point to a growing annual surplus leaving sellers competing in an increasingly crowded space.
Small-scale Technology Certificate (STC) market
The STC Clearing House returned to surplus by late December, with a pickup in creation as market participants pushed through their administrative work to create their certificates before year’s end.
Interestingly, though there was a predictable increase in December creations, seeing 2.9 million in the month compared to 2.4 million in November, it was half a million less than December 2023 which saw 3.4 million certs created.
With the Clearing House back in surplus, secondary market activity resumed, seeing regular trading at $39.90 for 2024 vintage certificates and $39.85 for non-24 eligible units.
At the time of writing the Clearing House remains in surplus by 352k. Q4 surrender is expected to be in the vicinity of 5 million STCs for which there are currently 5.2 million in the registry (plus 1.1m pending registration). This means in theory, there is enough registered certs to cover the surrender. However, it’s likely the clearing house will still be used in some capacity, which could result in a return to deficit.
Energy Efficiency Markets (VEECs and ESCs)
VEECs had a volatile end to the year, with prices steadily climbing across November, hitting a high of $113.00 as buyers picked off the few parcels on offer, given the continued lacklustre creation.
Then, December 2 saw the release of the Regulatory Impact Statement for the 2026-27 interim targets.
The consultation paper suggested multiple potential options for the two interim targets, all of which are considerably below the current target levels.
The preferred option is 5m for Cal 26 and 6m for Cal 27, though there is also a caveat which suggests if several regulatory amendments including minimum rental standards or electrification upgrade requirements are not successfully passed, then the preferred option is for those targets to be lower. The market’s reaction was negative, with prices in the spot softening to a low of $106.25.
The forward market was busy once the price had softened, with multiple trades at lower levels.
Though, the backwardation between spot and forward markets temporarily reduced following the price drop.
While the scheme targets appear likely to be lower from Cal 26 onwards, the Cal 25 target still needs to be met, which will require an increase in supply in 2025.
With no real developments on that side of things, it wasn’t long before the market began its upward creep again with the spot lading the way. This saw prices quickly recover their lost ground, returning to near previous levels by year’s end. At the time of writing, the spot price is sitting at $112.85.
In NSW the ESC price resumed softening to end the year, after having broken its yearlong losing streak in October. By mid-November prices had dropped from $16.00 back to the low $14s.
The price then bounced between the low and high $14s right through to year end, where it remains ($14.50) at the time of writing.
Activity in the scheme appears to have declined since changes were made mid-year to creation methods and ESC registrations were certainly lower in the second half of the year than the first. But the lag in registrations likely means many of those seen in H2 2025 came from earlier activity, meaning the registry will be closely watched for the next 3—6 months.
While creations are expected to decline, the size of the surplus continues to loom over the market which will likely see a slow recovery accordingly, in lieu of any government intervention.
CORE Markets is an end-to-end markets, technology and climate solutions partner for business. The above information has been provided by CORE Markets and relates, unless otherwise indicated, to the spot prices in Australian dollars, as of 21 January 2025.
Marco Stella is Head of Carbon and Renewable Markets at CORE Markets.
This article featured in the February edition of ecogeneration.
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