The Clean Energy Regulator (CER) states that the Renewable Energy Target (RET) is there to “reduce emissions of greenhouse gases in the electricity sector and encourage the additional generation of electricity from sustainable and renewable sources.”

However, the question should be raised as to how successful the scheme is and how can this be exploited by companies wanting to increase their “green” credentials, without increasing their reliance on offtake agreements with renewable generators.

The idea behind the scheme is to allow for the purchase of the electricity produced from a renewable source to be traded alongside the green certification that shows you bought that renewable electricity.

Seems simple doesn’t it?

You want renewable power, so you buy from that generation mix to back off the certificates, to show you are supporting generation from that industry.

However, if a company either doesn’t require these certificates or has met its obligations and has surplus certificates, they can sell these on the open market. Thus, giving the illusion they are supporting the growth in renewable / green generation but still purchasing their electricity from the cheapest source possible, which is usually a higher emitting Gas / Coal plant.

So, what does that mean for renewable certificate pricing and growth?

With the duck curve deepening due to increased renewables on the system but vertical integrated suppliers / AEMO continuing to run baseload plant, the number of certificates being produced will decrease due to renewables being curtailed at their highest production times of the day. Thus, reducing the number of certificates being produced.

As such this already saturated market is going to have shortages within the market. But much worse, this can then be gamed with suppliers withholding those certificates which have been produced to create a perceived shortage in the market, only for the real length to return in the final quarter and the price correction to come through.