On 20 July 2017, STC prices have dropped dramatically, affecting every company across the solar industry, small or large, as well as PV customers all over Australia. This dip has caused the price of a 5kW solar system to increase by approximately $1000. So how do STCs work and when can you expect system prices to go down again?

What are STCs?

The solar industry benefits from a government incentive called the ‘Renewable Energy Target’ (RET). Under the Small-scale Renewable Energy Scheme, households and businesses with solar power systems up to 100kW, receive Small-Scale Technology Certificates (STCs) for every megawatt hour of renewable energy generated or displaced by an accredited solar panel.

 

How are STCs calculated?

The quantity of STCs your PV system entitles you to is the product of:

1. The total size of your system

Number of panels x wattage of each panel.

2. The rating of the solar zone you reside in

Australia is divided into 4 solar zones.

Solar zone rating
Zone Rating
1 1.622
2 1.536
3 1.382
4 1.185

If you are unsure which zone you reside in, you can download the list of postcode zone ratings here.

 

3. The number of years remaining until the scheme is entirely phased out

Rebate phasing out schedule

 

So, if you install a 6.48kW system (including a 5kW inverter and 24 x 270W solar panels) in Perth in 2017, you will receive 6.48 x 1.382 x 14 = 125.37504 STCs.

You can easily simulate the number of STCs you’ll receive for your PV system using an online small generation unit calculator.

 

What is the value of an STC?

Like shares, STCs have a trading value, which fluctuates depending on supply and demand. Small-scale renewable energy system owners and registered agents have the option to sell STCs through the open market for an uncapped price, or through the STC clearing house at a fixed price of $40 (ex GST).

The process for trading STCs is as follows:

  • All certificates must be created and registered in the REC Registry.
  • The price depends on whether they are bought and sold in the open market or through the STC clearing house.
  • Payment for certificates purchased in the open market is negotiated between the buyer and seller outside of the REC Registry.
  • Payment for certificates purchased in the STC clearing house will be paid directly into the seller's nominated bank account.

There are various market reasons why the open market price differs from the clearing house or why the clearing house goes into surplus. Presently, there is an oversupply of STC production in comparison to the required production to reach the 2017 Renewable Energy Target. Therefore, the buyers (the electricity retailers) are able to negotiate lower prices and this is why the prices have dropped so drastically. At this point in time, no buyers will go through the clearing house when the open market price is sitting around $30.

It is important to note that STCs are sold in the STC clearing house only when there is a buyer, which means there is no guarantee on how long the STCs will take to sell. If there are more buyers than sellers, transaction of sale will happen immediately. However, if there are more sellers than buyers – as it is currently the case – or if there are no buyers at all, everyone trying to sell will enter a “first in best dressed” queue and will stay there until all STCs before theirs are purchased. The time they will be waiting is unknown.

 

What is the amount of the 'solar rebate'?

If you require rapid payment for your STCs, you can go through your retailer, who will offer a point-of-sale discount to have them assigned to them, or you can contact a registered agent, who can organise their creation and sale on your behalf. Most solar customers choose to exchange their STCs for an upfront discount on their PV system.

The lowest value STCs have held is $16, while their cap price is $40. Using the median price of $28 as a guide, the “rebate” you would receive for the 6.48 kW system described earlier is approximately 125 x 28 = $3500, which represents 30 to 40% of the price of a good quality system. Real-time STC market prices can be found online.