VEEC Market Update: 25 May 2022

The VEEC market experienced a steep market rise on 25 May, opening at $52.00 and closing at $70.50. This was an $18.50 increase over a matter of hours. In the large-scale solar and energy efficiency fields, many projects have been able to take advantage of the sharp price increase.

The VEEC market has proven the extent of its volatility, after a softening from 15 March, dropping from approximately $78.00 to $51.25 on April 7th. After a short increase to the high 50s, it dropped back to the low 50s before the May 25th increase.

Through Ecovantage’s market agility, our PIAM&V clients have been able to capitalise on the spot price to close their projects. It’s one of the many ways we assist our clients with an end-to-end process. We actively take forward positions to secure prices for clients to mitigate market volatility risk whilst also trying to claim benefits where possible.

The question has been raised as to why the market has risen, and its longevity, by small and large project developers.

Below is an outline of our perspective on the current situation, from a speculative point of view. This is not financial advice.

The VEEC price rise may be attributed to a release for consultation by the VEU to apply a discount factor of 0.5 to activity schedule 2, activity 32 – refrigerated display cabinets (RDCs). The mass RDC uptake (projected oversupply of VEECs) was a contributing factor to the previous market softening.

A possible/likely 50% decrease to an activity as large as RDCs is bound to have an impact. Whilst demand is set at 6.7m VEECs pa, supply, particularly from RDC’s, has been jumping around. Consultation on the change closes on 6 June, and a resolution is set to be released by 30 June.

This is coupled with the federal election results that gives an insight into the increasing pressures of moving towards Net Zero, and increasing carbon neutrality targets. The ACCUs market also saw increases in the spot as well as specific projects post-election as market participants anticipate further support with the new government.

To cap it off, the NSW Energy Efficiency certificates (ESC’s) have also rallied 10% or so after recent downturns in that market.

As we continue to gain further insight into the market outlook as changes roll out, we will continue to provide updates.