INSIGHTS: ACCUs rise to $14 at ERF III, bullish outlook for Auction IV

Share on FacebookShare on Google+Tweet about this on TwitterShare on LinkedInEmail this to someone
  • Modelling indicates the ‘highest clearing price’ for ACCUs grew to around $14 at the third ERF auction – a 40 per cent premium on the average price of abatement ($10.23) published by the Clean Energy Regulator (Regulator).
  • This reaffirms that the weighted average price ($10.23) is not representative of broader abatement value being contracted, with informed bidders continuing to extract full value by balancing risk/returns in line with ACCU supply expectations.
  • We estimate ACCU prices may push higher at ERF auction IV, with potential for lower participation and reduced competition to enable marginal participants to exert greater influence at the top end of the supply curve, pushing prices higher.
  • Higher prices are likely to be supported by secondary market activity, which may again act as a de facto floor price at ERF IV.

RepuTex today released its statistical review of the third Emissions Reduction Fund (ERF) auction, including our simulated back casting of proponent bids, our auction supply curve, and our estimated highest clearing prices, i.e. the last (or highest) point at which contracts were cut-off in line with the Regulator’s benchmark price and variable volume threshold.

The third ERF auction was held on the 27th-28th of April 2016, with 73 contracts entered into by the Regulator  for the delivery of 50,471,310 ACCUs. Approximately $516 million (M) in funding was committed (20 per cent of all ERF funding), at an average price per tonne of $10.23.

While the average price of abatement disclosed by the Regulator ($10.23) is a market reference point, in practice, it is of little help as a robust price signal in that it does not reflect the wider value of contracted emissions reductions. Nor does the average contract price reflect the current value of ACCUs – and in this way, should not be mistaken for a market-derived “carbon price”.

As shown in Figure 1, RepuTex modelling indicates the ‘highest clearing price’ for ACCUs grew to

Restricted Access

To continue reading this post, register below.

Continue reading this article

To continue reading this free article, simply click “register now” to access our free insights & events.

Access is free, and instant! Sign up below.

Register Now

Sign up to receive our research alerts

Create a free account to access our free insights and event invitations, and receive our research alerts via email. Access is complimentary, and instant. Sign up below:

Sign up for regular insights

LATEST UPDATES

  • Aligning Australian industry with net-zero emissions under the Paris Agreement

    Share on FacebookShare on Google+Tweet about this on TwitterShare on LinkedInEmail this to someone

    While the government continues to reject calls for a net-zero emissions target, policymakers are unlikely […]

    Research Insights | October 27th, 2020
  • Could LGCs boost carbon offset liquidity, and support renewable energy investment?

    Share on FacebookShare on Google+Tweet about this on TwitterShare on LinkedInEmail this to someone

    The Large-scale Renewable Energy Target (LRET) requires liable entities to meet their compliance obligations by […]

    Insights, Research Insights | October 13th, 2020
  • WEBINAR: Wholesale electricity price forecast for the National Electricity Market

    Share on FacebookShare on Google+Tweet about this on TwitterShare on LinkedInEmail this to someone

    In this event, we discuss the outcomes of our latest quarterly Australian Electricity Outlook (AEO) […]

    Research Insights, Webinars | September 14th, 2020
  • Perfect storm drives down NEM wholesale electricity prices, but “the only way is up”?

    Share on FacebookShare on Google+Tweet about this on TwitterShare on LinkedInEmail this to someone

    In this update, we discuss our expectations for wholesale prices in the National Electricity Market […]

    Research Insights | August 25th, 2020
  • OUTLOOK: NEM wholesale electricity and LGC price forecast 2020-40 (Q4 FY20)

    Share on FacebookShare on Google+Tweet about this on TwitterShare on LinkedInEmail this to someone

    Dear Subscriber, Our latest Australian Electricity Outlook (AEO) for medium- and long-term price development in […]

    Outlook, Research Insights | August 21st, 2020
  • Share on FacebookShare on Google+Tweet about this on TwitterShare on LinkedInEmail this to someone