Enviro Costs Surge

Carl Daley
Carl Daley
Enviro Costs Surge

Declining power prices have been met by rising environmental certificate prices, dampening expectations of lower power costs.

The forward power prices have fallen remarkably, although have been strengthening lately. On the other hand, environmental charges have been surging upward due to:

  1. the continual popularity of solar PV systems has increased the number of Small-scale Technology Certificates (STC) that must be submitted to the Clean Energy Regulator by each retailer
  2. Victoria's Energy Efficiency Target (VEET) scheme, has been impacted by the Melbourne lock-downs, COVID induced hesitancy for home visits and rule changes
  3. rising Large Generation Certificate (LGC) forward prices

As an example, the following chart below shows the FY-21/22 cost journey since 1 July 2019, beginning with Victoria. By selecting the drop-down box, other States can also be shown.

Victorian FY-21/22 prices have fallen from a total bundled expected cost of $88.09/MWh in July 2019 to $68.17/MWh at the end of April 2021. In Jul-19, the environmental charges represented 18.8% of the FY-21/22 forward bundled costs, and now at the end of Apr-21, environmental charges represent 40.3% of the bundled cost. VEETs which only apply to Victoria, has been the main contributor to the higher environment costs by rising from $3.75/MWh in Jul-19 to $10.02/MWh as at the end of Apr-21.

You are welcome to test other States and view each cost component movement over time using the State drop-down and legend, to turn on or off the displayed variables.

The following chart shows the cost variation since 1 July 2019 as at the end of each month. It can be seen how the fallen power price has been partially offset by rising environmental charges.

Further information on market trends is available from our Monthly Market Report.

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