The spot STC market’s stable softening which started in October has brought a low that has not been evident since May 2013, and it has proved that the STC market can very well be highly volatile. While it has recovered a little, the forward curve has benefitted from its share of changes in shape.
The spot STC energy market, spilling over from the previous month, started November by losing its stance. Yet instead of recovering early, the spot sustained its fall up until the last week, going for as low as $36.40. 3 days was spent in the same position (which is an 18-month low) before it recovered to $37.
Energy markets considerably volatile
Probably the most crucial understanding that can be gleaned from November is that the STC market is very volatile. This had come as a shock to many who had been used to stable performance in August as well as in September.
OTC spot trading volumes were low but still managed to stay at 660k in November. The forward was quite busy once again throughout the month with the fourth quarter settlements being the most popular.
The spot market movements also brought forth some rather unusual changes in the forward curve’s shape. As the spot market dipped, the curve carried a spot plus cost escalation carry cost over the quarter and well into Q1 and Q2. But after the recovery, the escalation was upheld in Q4 while the curve was flattened from 2015 Q1.
In November the STC submission was started welcoming 3 of 2013’s highest weekly totals. However the increase came rather late and could not make any serious impact.
Coalition changes plans due to backlash
As for the RET negotiation issue, it seems that the Coalition government has already given up its plans of taking out the Small Scale Renewable Energy Scheme after they received major industry and community backlash.
But there are still some concerns for commercial sized systems markets considering the slippery language that the Government is using and this has led people to believe that they may still lower the size of the maximum system under the SRES from 100kW to a much lower number.
The November performance of large-scale generation certificates (LGCs) has certainly been a shock to those who hoped that RET negotiations were bound to be easy. However the month may be the one thing that made such a significant impact to the carbon tariff plight and pushed international action towards climate change.
RET negotiations continue with both parties not coming to an agreement
Renewable energy markets had high hopes that the political parties would arrive at an agreement in regards to the return of the RET but this did not materialize. With the G20 bringing international leaders to Brisbane, Labor government announced it was backing out in the negotiations due to the Coalition’s intransigence of position.
The curve has continued to perform at an escalation of 4% beyond the spot in the forward market whilst in the options market there has been some activity noted in the early weeks of November. However for the rest of the month it was quite subdued with very few sellers.