The Act places a legal obligation on liable entities (entities that make wholesale acquisitions of electricity) to purchase and surrender certificates in proportion to the amount of liable electricity they acquire in a given year, or pay a shortfall charge for each certificate not surrendered. Liable entities have a full calendar year, known as an ‘assessment year’, to surrender the required amount of certificates.
For each assessment year, liable entities are required to report relevant acquisitions of electricity and partial exemptions in megawatt hours and to acquit their liabilities under the Renewable Energy Target by:
Section 40 of the Act specifies the amount of renewable energy in gigawatt hours to be generated by renewable energy power stations for every year up to 2030. Liable entities are required to purchase a set number of large-scale generation certificates each year, providing demand for the supply of certificates created by power stations. The number of large-scale generation certificates that liable entities must purchase is calculated by the ‘renewable power percentage’ set annually in the Regulations.
The renewable power percentage takes into account a number of factors, including the legislated annual target, the estimated amount of electricity that will be acquired by liable entities, the level of supply in the renewable energy certificate market, and partial exemption for emissions-intensive trade-exposed activities. As the legislated annual targets increase to reach 41,000 gigawatt hours by 2020, the renewable power percentage changes each year in proportion to the annual targets.16
The renewable power percentage for 2013 was 10.65 per cent, equivalent to 19.1 million large-scale generation certificates.
Liable entities are also required to purchase small-scale technology certificates. There are no specified annual targets under the Small-scale Renewable Energy Scheme. Instead, the number of small-scale technology certificates that liable entities must purchase is based on the expected supply of small-scale technology certificates.
The ‘small-scale technology percentage’ is calculated based on the estimated:
The small-scale technology percentage for 2013 was 19.70 per cent, equivalent to 35.7 million small-scale technology certificates.
The Act includes provisions to provide partial exemption from Large-scale Renewable Energy Target and Small-scale Renewable Energy Scheme liability for electricity used in defined emissions-intensive trade-exposed activities. Such activities include production of glass containers and bulk flat glass, integrated production of lead and zinc, manufacture of newsprint and cartonboard, and refining of petroleum. Emissions-intensive trade-exposed activities are specified in the Regulations and are listed in Table 8.
Under the Act, prescribed persons (usually entities that carry on emissions-intensive trade-exposed activities) may apply for partial exemption certificates. If a partial exemption certificate application is approved, the Clean Energy Regulator will issue the prescribed person with a certificate. The certificate states the amount of electricity in megawatt hours for which exemption can be provided to the liable entity named on the certificate (usually the retail electricity supplier) for electricity used in the emissions-intensive trade-exposed activity during the year specified in the certificate.
In 2013, the Clean Energy Regulator received 173 partial exemption certificate applications by the legislated deadlines. Applications from prescribed persons spanned 49 of the 51 eligible emissions-intensive trade-exposed activities.
As at 31 December 2013, 165 partial exemption certificates had been issued, totalling 31,608 gigawatt hours of partial exemption for 2013. Table 8 provides details of the partial exemption issued in 2013 for each emissions-intensive trade-exposed activity.
During 2013, the Clean Energy Regulator received and assessed energy acquisition statements and shortfall statements submitted by liable entities for the year ended 31 December 2012. Statements for 2013 were due to be submitted by 14 February 2014 and will be assessed in 2014.
Liable entities lodged their 2012 energy acquisition statements and shortfall statements by the due date of 14 February 2013. Ninety liable entities were required to report for the 2012 assessment year, four more than in 2011. Of the 89 entities that lodged a 2012 energy acquisition statement:
Liability is determined by deducting partial exemptions from the overall amount of relevant acquisitions of electricity. This is known as the liable entity’s ‘reduced acquisitions’. In total, liable entities reported 178,690 gigawatt hours of reduced acquisitions for 2012: 211,197 gigawatt hours of relevant acquisitions of electricity less 32,507 gigawatt hours of partial exemptions.
Reduced acquisitions for the Large-scale Renewable Energy Target in 2012 resulted in a liability of 16.35 million large-scale generation certificates. Liable entities had a 99.98 per cent compliance surrender rate. At the end of the 2012 assessment year, the Clean Energy Regulator assessed 51 liable entities with an accumulated carried forward surplus of 95,521 large-scale generation certificates (which can be used to acquit future large-scale generation certificate liabilities).
Two liable entities were found to have a total shortfall of 3,648 large-scale generation certificates, but as both shortfalls were within 10 per cent of those entities’ total large-scale generation certificate liability, the large-scale generation certificate shortfalls were able to be carried forward and added to the entities’ 2013 large-scale generation certificate liability.
Graph 13 shows the number of large-scale generation certificates that were accepted to acquit liabilities under the Act.
Graph 13: Large-scale generation certificates accepted to acquit a mandatory liability for the assessment years from 2001 to 2012
Under the Small-scale Renewable Energy Scheme, liable entities are required to surrender small-scale technology certificates each quarter, in February, April, July and October, to meet quarterly liabilities.
Reduced acquisitions for the Small-scale Renewable Energy Scheme in 2012 resulted in a liability of 42.8 million small-scale technology certificates. Liable entities had an average 99.97 per cent compliance surrender rate for quarters 1 to 4. At the end of the 2012 assessment year, the Clean Energy Regulator assessed 53 liable entities, with an accumulated carried forward surplus of 641,970 small-scale technology certificates (which can be used to acquit future quarterly small-scale technology certificate liabilities).
Seven liable entities were found to have a total shortfall of 12,876 small-scale technology certificates. All those entities were required to pay the shortfall charge, because there is no buffer for entities with small-scale technology certificate shortfalls. The shortfalls for each quarter were as follows:
As at 31 December 2013, six of the seven liable entities with shortfalls had paid their shortfall charges.
Graph 14 shows the number of small-scale technology certificates that were accepted to acquit liability against the legislated targets for 2011 and 2012.
Graph 14: Small-scale technology certificates accepted to acquit a mandatory liability for 2011 and 2012
The Act allows for reduced acquisitions of electricity to be amended in the 12 months following lodgement of statements. Two mechanisms enable this.
The first mechanism provides liable entities with flexibility in managing their liability. For instance, changes in metering data may impact the amount of electricity acquired by a liable entity, potentially leading to shortfall charges. Requesting amendments under section 45A of the Act enables liable entities to surrender additional certificates and avoid shortfall charges.
The Clean Energy Regulator received two requests for amendments under section 45A of the Act between 15 February 2013 and 14 February 2014. One request was approved and one was refused.
The second mechanism enables the Clean Energy Regulator to amend retrospectively a liable entity’s reduced acquisition should information reported in the subsequent four years indicate that an amendment is required. As a result of such amendments, liable entities may be assessed with certificate surpluses or shortfalls.
Liable entities that are assessed with certificate shortfalls are required to pay shortfall charges or apply to surrender additional certificates. From 15 February 2013 to 14 February 2014, the Clean Energy Regulator received and approved eight applications to surrender additional certificates.
In addition to allowing for amendments to reduced acquisitions of electricity, the Act provides flexibility by allowing liable entities to apply to amend the amount of small-scale technology certificates they are required to surrender for quarters 1 to 3. Liable entities typically apply to reduce the amount of small-scale technology certificates they are required to surrender if they have lost customers or are expecting lower amounts of electricity consumption from their customers. Failure to apply correctly can result in shortfall charges.
From 15 February 2013 to 1 October 2013 (the due date), the Clean Energy Regulator received and approved four applications to amend required surrender amounts for 2012.
Liable entities that did not lodge 2012 energy acquisition statements and shortfall statements were able to apply to surrender small-scale technology certificate amounts for the 2013 assessment year, quarters 1 to 3. Liable entities apply to surrender small-scale technology certificate amounts if their liability under the Renewable Energy Target started during the year or if they have inconsistent liabilities for assessment years. Failure to apply and to surrender small-scale technology certificates results in the issuance of shortfall charges.
From 1 January 2013 to 31 December 2013 (the due date), the Clean Energy Regulator received and approved eight applications for a required surrender amount.
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