ASX futures fail to trade

Australian securities exchange operator ASX's plans to take a lead in the renewable energy market stalled yesterday when a new futures contract failed to trade after listing for the first time.

The futures contract and a related options contract over renewable energy certificates (RECs) were launched to reduce price risks faced by electricity suppliers as Australia looks to cut its reliance on electricity from coal-fired power stations.

Traders said the debate over Australia's proposed emissions trading scheme (ETS) had taken some of the interest out the contract.

"It will take people a little bit of time to digest just what is going on in these markets and with the ETS where all the focus is at the moment," said Gary Cox, head of energy trading at Newedge Australia.

The ASX decided to launch the REC futures contract after the government passed legislation in August mandating that 20 per cent of Australia's energy should be from renewable sources such as wind farms by 2020, more than four times the current level.

RECs are a form of currency that can be earned by installing solar panels, wind turbines and micro-hydro plants. Each REC represents one megawatt hour (MWh) of electricity generated from renewable energy and can be traded once registered.

Cox said there was also uncertainty after the government decided to hold an inquiry into the market being flooded with RECs generated from home-based solar panel installations that received government grants.

REC prices have dropped from a spot price in the over- the-counter market in June of A$50 (NZ$63) to around A$31.10 amid the excess supply.

More than 15 million RECs have been created and only about 10 million were needed to meet this year's requirements under the renewable energy target. The government expects an expanded target for the amount of energy produced from renewable sources from January will boost demand for RECs.