Brian Price’s Post

We are pleased to announce Mercari Pty Ltd as an official partner for our upcoming Policy Forum scheduled for February 21st and 22nd 2024. Set in Sydney over two days, the Policy Forum will focus on two essential themes: Day 1 will be dedicated to collaboratively developing a proactive policy submission, while Day 2 will concentrate on the effective management of transitioning into a regulated industry. Mercari operates an Australian regulated financial derivatives exchange offering a broad range of products including energy, commodity, environmental, interest rate and foreign exchange derivatives. The Company is licensed to operate a Tier 1 wholesale financial derivatives market exchange (“AML”) under Section 791A of the Australian Corporations Act and has extensive industry experience in designing derivative and associated structured products as well as operating complex licensed rule based financial market infrastructure. With respect to the crypto/virtual asset class, Mercari is currently evaluating a number of projects including the enablement of an acceptable grade of institutional custody and the provision of licensed institutional derivative product markets. In January 2022 Mercari announced its APAC Crypto Reference Rates, the Mercari Digital Asset Research Bitcoin and Ethereum Reference Rate. Combining the extensive experience, innovative mindset and regulatory know how of its principals, Mercari is also uniquely positioned to provide institutional and wholesale investors with valuable insights in navigating the complexity of new products in markets with varying levels of regulation. Limited tickets are now available for Day 2 of the Policy Forum on February 22nd from 10am - 3pm. Tickets: https://lnkd.in/gNACdBXX Blockchain Australia Members $100 discount code in the newsletter or contact kdutt@blockchainaustralia.org #NowNextBeyond #IndustryVoice

The large-scale generation certificate (LGC) market was still in an effective deficit of about 14.4 million certificates at the end of Q3 for the 2023 calendar year; our view is that LGC supply/demand looks very tight for at least the next 3 years. Despite that material deficit, the spot price fell from $58 to $51.75 during the quarter and then drifted lower post quarter to around $47. The effective deficit arises from the taking and redemption of shortfall charge as a liquidity mechanism for the LGC market. At the end of Q3 there was still around $910 million of shortfall charge in consolidated revenue, paid by electricity retailers, who have a commercial (and tax effective) incentive to redeem that by surrendering LGCs to us within the 3-year allowable period. This is equivalent to redeeming about 14 million LGCs. In addition 0.4 million LGCs are retailers carrying forward some liability. Why do we believe LGC supply & demand looks like remaining tight for the next few years? ▪️ The shortfall charge balance in consolidated revenue has now been in the $900 million to $1 billion range for the last 3 years. ▪️ While our expected new supply of LGCs for this year will be 48 - 50 million (well above the required 33 million to be surrendered each year against the legislated target), voluntary cancellation of LGCs to prove the use of renewable energy continues to ramp up, with our revised estimate now 9.5 million for 2023. ▪️ About 4 to 5 million LGCs will need to be cancelled each year to redeem shortfall charge within the 3-year period. ▪️ Looking forward on the supply side there is still about 5 GW of wind and solar power stations under construction. The recently announced expanded Capacity Investment Scheme will also add to future supply, noting there is a lag of several years for new projects to be built and start generating. ▪️️ On the demand side voluntary LGC cancellations are expected to continue to grow materially year on year from existing schemes such as GreenPower and ClimateActive. The proposed mandatory climate-related financial disclosures arrangements, together with NGER reporting moving towards market-based accounting using certificates, could unlock voluntary demand of more than 100 million LGCs per annum. LGCs can be created for generation up to the end of the 2030 calendar year. Final RET liability acquittal will occur on 14 February 2031. Under the RET legislation, only LGCs can be used to meet RET liability and to redeem shortfall charges. Shortfall charges can be redeemed after the last liability date until all LGCs have been surrendered. The Renewable Energy Guarantee of Origin (REGO) certificate consultation paper proposed a framework for the creation of renewable energy certificates, like that under the RET, that will exist after 2030. I hope you enjoy our full analysis in the LGC chapter. Quarterly Carbon Market Report https://bit.ly/3RvhlSk Capacity Investment Scheme https://bit.ly/46K2ubc