Australia's falling Renewable Energy Certificate prices delays Wind Energy Projects

Renewable Energy Certificate (REC) are one of the popular subsidy measures used by government around the world to promote Green Energy.However the market pricing of these certificates leads to uncertainty which can deter private capital from investing in projects which depend on REC prices.Periods of oversupply are common in any market and RECs are no different leading to sharp fall in prices.This can destroy the viability of existing projects and lead to deferment of planned Renewable Energy projects.This is what has exactly happened in Australia where falling REC prices have led to stock price falls for existing wind operators and made power utilities defer their wind farm plans till REC prices become more attractive.

Italy which also uses a REC scheme to promote Renewable Energy faced a similar problem in 2004 before it put a floor price on REC by mandating government agency GSE to buy all excess certificates.This ruling which was proposed to be revoked in 2010 has been shelved as Renewable Energy targets was in danger of not being met.The Australian government has also amended the law to slow down the supply of Renewable Energy Certificates but the supply overhang would not be solved till 2015.The retail electricity providers which are mandated to buy these certificates have reaped a bonanza stocking up on RECs as prices became cheap.The whole aim of the government to promote Renewable Energy with a 20% target by 2020 has definitely slowed down by ineffectual policy making.

Analysis: Australia energy law faces green certificate overhang – Reuters

Continued weakness in the cost of the certificates, used as a partial subsidy for clean but expensive power, may slow investment in clean energy that the industry hopes could reach A$20 billion by 2020.Renewable Energy Certificates (RECs) flooded the market last year after a supply spurt generated by small solar household installations, squeezing prices of what is a crucial component of wind developers’ profit.This led to parliament last month passing amendments to the nation’s renewable energy target scheme, splitting it into programmes handling small-scale and large-scale investments.Energy firms Origin and AGL have combined wind resources of 4,000 MW in the pipeline — double that of Infigen and Transfield at more than 1,000 MW each — they can choose to develop when REC prices recover.Based on current power contracts, AGL Energy and Origin, which bought RECs when prices bottomed near A$29 per MWh in 2009, have adequate projects and certificates to meet their obligations under the LRET scheme until 2014.