Industry analysis of STC targets for 2014
Small-scale technology certificates (STCs) are the key component of solar subsidies, the very mechanism by which customers receive discounts when buying a solar power system. With the vast amount of certificates being created and traded, non-binding estimates are made on the expected target to avoid unexpected disruptions to the solar certificate market.
The Clean Energy Regulator has set a target of 18.6 million STCs for 2014, representing a burden for the energy retailers at approximately 10.48% of their purchase price for electricity. This figure has fallen since the peak of 23.9% reached in 2012 following a market correction, reducing the burden on electricity retailers and thus pressures on the cost of providing electricity.
With the Coalition government’s support for renewable energy in doubt, it’s comforting to see the CER set a target slightly higher than last year’s target of 16.7 million STCs. Although there’s no occurrence of government influencing STC estimates, the target is seen as a steadying indicator for the solar industry and sits inline with independent estimates of the health of the market.
With STCs distributed between rooftop solar power systems and solar hot water systems, the 18.6 million certificates would represent 710MW of solar capacity installed. Although this number is down on the estimated 870MW of solar power that was installed last year, a similar number of STCS (and thus expected sales) holds steady for the next two years indicates reasonably steady sales are expected in the medium term with a degree of flexibility in the target estimates over the next few years.
It is predicted that 2014 could be a testing year for the solar industry, with suspicion that subsidies could eventually be removed completely competing with price reductions lowering the barrier of entry for curious potential customers.
STCs usually trade on the certificate market for roughly $39, and with news of the target the price head steady at $38.70 at the close of trading last week.
