Update 19 July:
STC Prices dropped to $26 today.
Our first post a month ago, when prices had dropped from $38 to $35.5, was more warning about a potential further price drop. The price since then remained steady, and even went up a bit. But in the past week it has dropped sharply. This equates to around $1,000 per 5kW system.
Around Australia, there are many awkward conversations between solar companies and customers they have given quotes to recently. I don’t think such volatility is good policy design, as this is not multinationals dealing with investment banks, who can manage such risk with swaps and derivatives, but local solar companies working with households.
This is really tough for installers, and hard to manage. Please be understanding with them as they work to find a solution for both parties. And makes it challenging for the continued planning of Bulk Buy 2.
Original Post 23 June:
Small Technology Certificates (STCs) are starting to drop. And this effects the price you pay for solar.
They have been trading at $38 for around 3-4 years now. But this week they dropped to $35.5:
This graph shows how STC’s have remained at their maximum price of $40 for sometime. Generally brokers charge around $2 to trade them, making them $38 for sellers:
What does this mean?
When you get a quote from your installer, there is a Gross Price, then they deduct the STC rebate to provide you the Net Price you pay. The install the system, charge you the Net Price, get you to sign a form, then they claim the STC rebate.
If you build a solar farm, you get Large Scale Generation Certificates paid as you generate over time. For small systems, this would make no sense. So you get STCs paid up front for generation up until 2030. This is all under the renewable energy target (RET).
Hypothetical illustration only. Rounded for clarity.
For a 5kW system in Sydney, this:
- Generates around 100 STCs until 2030
- sees a Gross Price of around $10,000 for the solar system
- Sees $3,800 of STC rebate
- Net Price becomes $6,200
But if if STC’s are $35, the rebate is only $3,500. So your system goes up to $6,500.
Approximately, for every $1 the STC price drops, there is a $100 extra cost to get solar.
If you are getting a bigger system, the effect is higher.
What’s the risk?
For the general market, solar is becoming so cheap, and electricity prices are going up, that a reasonable drop is OK. But for households in the middle or arranging solar, or solar companies who have given quotes, it can be quite disruptive.
If you already have a quote, your installer hopefully takes this risk and will hopefully maintain their price.
But there is a risk that STC prices could drop further.
On the other side, the drop may be temporary. STCs buyers may snap them up at this cheaper price, bring the price back up.
Why is this happening?
Under the RET, electricity retailers have to buy a certain amount of STC’s for every 100MWh of electricity they sell to households, commercial and industrial electricity customers. Electricity retailers like Origin and AGL buy them from solar companies who install solar, via brokers.
So there are buyers and sellers, and the price is set by supply and demand. When lot’s of people install solar, like is happening now, the price can drop.
For years there has been an undersupply, so retailers can buy them straight from the Clean Energy Regulator clearing house at the maximum price of $40. And they carried a shortfall during that time. But the shortfall has disappeared this year, and now the trading price comes into effect.
It’s not all bad news
It’s a shame this is happening in such a good news week. NSW IPART have recommended that the Feed-In-Tariff for excess/spill rooftop solar from households rises from current 5-6 c/kWh to 11.9 to 15.0 c/kWh range. Their draft recommendation was 11.6 to 14.6 c/kWh.
AGL have also increased their solar FiT from 6.1 c/kWh to 11.1 c/kWh in NSW, an 82% increase!
And recent analysis shows that the bigger system you get, the better, even for low energy users.