auto_stories Quarterly Carbon Market Report September Quarter 2023

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Market Dynamics

In Q3 2023, 9.6 million STCs were created. In the first 3 quarters of 2023, 27.4 million STCs were created. To meet the 2023 small-scale technology percentage (STP) of 16.29%, liable entities must surrender 28.5 million STCs. In Q3 2023, 7.2 million STCs were surrendered, a compliance rate of 99.95%. A total of 24.2 million STCs have been surrendered in the first 3 quarters of 2023.

STCs can be sold on the spot market or through the STC clearing house at a fixed price of $40 (excluding GST). If no STCs are available for sale in the STC clearing house, the Clean Energy Regulator (CER) can create STCs for buyers to purchase. This causes the clearing house to go into an effective deficit. If the clearing house is not in deficit, it is in an effective surplus. In an effective surplus, those who wish to sell STCs join the STC clearing house transfer list. This list works on a first-in-first-served basis, with STCs sold to buyers in order of the transfer list.

The status of the STC clearing house influences the STC spot price in the market. Following the Q2 surrender on 28 July 2023, the STC clearing house deficit increased to 4.3 million STCs and the spot price was $39.90. The STC clearing house returned to an effective surplus at the end of September 2023. Following the return to surplus, we saw more sales volume activity in the STC spot market and a slightly lower reported spot price of $39.80.

Following the Q3 surrender on 30 October 2023, the STC clearing house moved back to a deficit of 1.6 million STCs. This is the smallest post quarter deficit in 2023. We expect to move back to an effective surplus before the Q4 surrender on 14 February 2024 and will likely remain there in the short to medium term.

Insights

• Bigger rooftop solar systems and record quarterly capacity installed
• ASHP installations continue to break records

Bigger rooftop solar systems and record quarterly capacity installed

In Q3 2023, 88,000 rooftop solar systems were installed. This is 3,500 more systems compared to Q3 2022. A Q3 record was set for average rooftop solar system capacity at 9.3 kW in Q3 2023. This beat the previous Q3 record of 8.7 kW set in 2022. In Q3 2023, half of the rooftop solar systems installed had a capacity over 10 kW. Systems between 10-15 kW accounted for 27% of total installations, up from 20% in Q3 2022. As discussed in the Q2 2023 QCMR, this may be due to households preparing for electrification.

In Q3 2023, 813 MW of capacity was installed, a Q3 record. In the first 3 quarters of 2023, 2.2 GW of capacity was installed compared to 2.3 GW for the same period in the record year of 2021. Typically, the highest capacity is installed in Q4 each year. Hence, we may match the 2021 record of 3.2 GW in 2023 if we see a big Q4.

The Solar Choice price index includes the total retail price (factoring in STC rebates) for rooftop solar systems. In October 2023, a 7 kW system cost around $7,190, with a payback period of around 4 years. This payback period is based on 40% of the solar produced being used by the household. Over the longer term, costs have fallen by approximately 18% since 2018. On average, a 7 kW system cost around $8,500 in 2018. Solar prices reached a low in October 2021 and then increased slightly until mid-2023. The Solar Choice price index suggests that prices have since begun to turn downwards. Many factors influence rooftop solar system prices. This includes the cost of materials, such as the panels themselves, labour and the offered STC rebate. It seems falling retail prices and rising energy costs are keeping payback periods relatively stable. These factors may help to partially offset the shorter deeming period.

Access to additional incentives from states and territories can further reduce upfront costs for rooftop solar systems for some households. For example, the Kimberly Communities Solar Saver program in WA announced on 17 November 2023.

In Q3 2023, 7% of systems were installed with a battery. Note, this data is voluntarily reported to the CER and the real proportion is likely higher. We encourage battery data to be supplied with STC applications. To the end of September 2023, there have been more than 17,000 reported battery installations. This is a 14% increase on the reported 15,000 batteries installed in the same period in 2022.

ASHP installations continue to break records

In Q3 2023, 40,000 ASHPs were installed. To the end of Q3 202​3, more than 101,000 ASHPs were installed, exceeding the total 87,000 ASHPs installed in 2022.

In addition to support from the Small-scale Renewable Energy Scheme (SRES), state schemes are playing an important role in energy efficiency technology uptake. We saw NSW continue to lead the number of ASHP installations. To the end of Q3 2023, NSW installed 60,000 ASHPs, a near 700% increase on the 7,500 installed in the same period in 2022. ACT, NSW, SA and Victoria have incentives in place to assist consumers switch to ASHPs. We also expect installations in Queensland to increase. In September 2023, the Queensland Climate Smart Energy Savers rebate commenced.

Supplementary figures