Excess demand or excess supply? A comparison of renewable energy certificate markets in the United Kingdom and Australia.

Comparing the United Kingdom's Renewables Obligation and Australia's Renewable Energy Target, this paper reconstructs the market for green certificates in which penalties are imposed on missed certificates. Our analysis shows that excess demand in the Renewables Obligation makes the penalty the minimum certificate price, but excess supply in the Renewable Energy Target makes the penalty the maximum certificate price. Further, excess supply also implies that the sales of certificates are not guaranteed in the Renewable Energy Target. Therefore, compared to the Renewables Obligation, generators face greater risk under the Renewable Energy Target as there is more uncertainty about the price of certificates and the possibility of sales. • Reconstruct demand and supply curves for TGC models. • Excess demand (supply) makes the penalty the minimum (maximum) certificate price. • The recycling mechanism pushes up the certificate price in the RO. • The refunding mechanism pushes down the certificate price in the RET. • Generators under TGC with excess supply face greater price risk and volume risk. [ABSTRACT FROM AUTHOR]