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Renewable Energy Target

Accelerating carbon abatement for Australia by encouraging investment in renewable energy

Purpose

The Renewable Energy Target aims to encourage additional generation of electricity from ecologically sustainable renewable sources and reduce emissions of greenhouse gases in the electricity sector.

Summary of progress in 2015–16

During 2015–16, a total of 15.9 million megawatt hours of electricity were generated by large-scale renewable power stations and an estimated 9.5 million megawatt hours were generated or displaced (not required from the grid) from small-scale systems, mainly rooftop solar photovoltaics.

How it works

The Renewable Energy Target works by creating a market for renewable energy certificates. On the supply side, certificates are created for each megawatt hour of renewable energy generated or displaced. On the demand side, liable entities (mainly electricity retailers) buy certificates to meet their obligations under the Renewable Energy Target.

There are two elements:

  • the Large-scale Renewable Energy Target, which encourages investment in renewable power stations to achieve 33 000 gigawatt hours10 of additional renewable electricity generation by 2020, and
  • the Small-scale Renewable Energy scheme, which supports small-scale installations like household solar panels and solar hot water systems.

We regulate both certificate supply and demand to ensure scheme integrity, and provide an online registry to enable the market to operate.

Renewable Energy Target administrative reports

We publish detail about the operation of the Renewable Energy (Electricity) Act 2000 (the Act) in an annual administrative report, which is required by the legislation. Each administrative report presents data and information about scheme operation and achievements from the previous calendar year. The 2015 Renewable Energy Target Administrative Report was tabled on 3 May 2016 and is available on our website.

First annual statement

The latest administrative report covering the operation of the Act for the 2015 calendar year also includes, the first time, the Renewable Energy Target annual statement and supporting information about progress towards meeting the revised 2020 Large-scale Renewable Energy Target. Our annual statement found that progress in 2015 was adequate under the circumstances, and that the 2020 target is achievable. We estimated that an additional 6 000 megawatts of installed capacity is required to meet the total cumulative demand for large-scale generation certificates through to 2020. We also found no indication that the impact on household electricity bills in 2015 was more than anticipated with the amended target.

Regulating market supply

Large-scale power stations

The Large-scale Renewable Energy Target creates a financial incentive to establish and expand renewable energy power stations such as wind and solar farms or hydroelectric power stations.

Power station accreditation

Power stations that generate electricity from eligible renewable sources may be accredited under the Large-scale Renewable Energy Target. The number of power stations accredited under the scheme has steadily increased since 2001.

We have seen an increase in small commercial and industrial solar photovoltaic systems, around two times the size of the average household system. A large utility scale renewable power station is typically around 100 to 200 megawatt (100 000 to 200 000 kilowatts) capacity range.

SNAPSHOT

78 new renewable energy power stations accredited in 2015–16.

In 2015–16 we accredited a record 78 new renewable energy power stations, bringing the total since the scheme began to 532. This higher quantity of accredited power stations but lower combined megawatt capacity (compared to previous years) represents an increase in the number of smaller power stations accredited under the scheme—particularly those in the 100 to 500 kilowatt range.

The total capacity of all power stations accredited during the year is 280.26 megawatts. This is significantly lower than previous years and represents a lower investment during the review of the scheme and introduction of new legislation in June 2015.

In 2015–16 we processed all applications within the required six weeks.

Table 5: Number of power stations accredited and capacity, 2015–16
Number of power stations accredited Capacity in megawatts
2015–1678280.3
2014–1538494.4b
2013–1438a622.7
Cumulative total (since 2001)53326 321.5

a This is a correction to the 2013–14 data
b Capacity of accredited power stations was incorrectly reported in the Clean Energy Regulator Annual Report 2014–15 as 836.7 megawatts

Power station energy sources

Although there are over 19 eligible renewable energy sources under the Renewable Energy Target, the most common sources are wind, solar and hydro, bagasse, biomass and landfill gas.

In 2015–16, for the third year in a row, there was a significant increase in the number of accredited renewable energy power stations using solar energy. Of the power stations accredited in 2015–16, a total of 68 were accredited using solar. This is more than double the quantity of solar power stations accredited in 2014–15 and represents a continuing trend in commercial and industrial scale power stations using solar—particularly in the 100 to 500 kilowatt range.

Three power stations contributed to the bulk of total capacity in 2015–16, including a 53 megawatt power station and a 102.4 megawatt power station using solar energy, and a 102.4 megawatt power station using wind energy.

Table 6: Additional accredited power stations by renewable energy source in 2015–16 and their capacities in megawatts
TypeNumberTotal capacity (megawatts)
Biomass515.8
Hydro10.2
Solar68141.4
Wind4122.8
Total78280.3

The total number of accredited renewable energy power stations now comprises 182 solar, 151 biomass,11 108 hydro, seven waste coal mine gas and 88 wind. This total number is greater than the total number of accredited power stations, as power stations may have multiple fuel sources. There are three accredited power stations with both wind and solar as their fuel sources.

Large-scale certificates created

Large-scale generation certificates are created based on the amount of electricity generated by accredited power stations using renewable energy sources. Each certificate represents one megawatt hour of renewable energy generation.

In 2015–16 we validated 15 949 840 large-scale generation certificates. This reflects 15 949 840 megawatt hours of additional electricity generated by accredited renewable energy power stations, enough to power about 2.5 million homes per year.12

More than 70 per cent of the certificates validated in 2015–16 were from power stations using wind as the energy source, 14 per cent from biomass, with the remaining from across hydro, solar and waste coal mine gas energy sources.

Projects committed

A large-scale power station project is considered committed when it has received all development approvals and a final investment decision within the normal commercial understanding of that term. Finance approvals are independently verified.

In our first Renewable Energy Target annual statement to Parliament for the 2015 calendar year, we said the total capacity of committed build in 2016 will need to be around 3 000 megawatts for satisfactory progress towards the 2020 target.

As at 30 June 2016,13 there were 10 large-scale power station projects committed, with a total combined capacity of 339 megawatts. This includes one project in New South Wales, one in Victoria, two in Queensland, three in South Australia and three in the Australian Capital Territory.

Table 7: Committed Large-scale renewable energy projects, 2016a
Date of financingProject nameStateMegawatt capacity
9/02/2016Waterloo Phase IISA18
7/03/2016Normanton Solar FarmQLD5
17/03/2016Mugga LaneACT11
31/03/2016Coober Pedy Renewable Diesel Hybrid projectSA5
8/04/2016Goldwind White RockNSW175
26/04/2016Raygen Newbridge CSPV PlantVIC1
28/04/2016Valdora Solar FarmQLD12
10/05/2016OneSun Capital Solar Farm WilliamsdaleACT10
25/06/2016Majura Valley Tracking Solar FarmACT2
28/06/2016Hornsdale Wind Farm Stage 2bSA100
Total339

a Committed large-scale renewable energy projects are reported on a calendar year basis. This table represents the committed projects from 2016 only.

b 100 megawatts of this project has feed-in tariff through ACT wind auction one.

In addition to the 339 megawatts committed so far in the 2016 calendar year, we have identified a further 598 megawatts renewable energy projects that are likely to be committed in the near future.

The first six months of the year showed positive signs of an increase in commercial activity to finance the required new build. This is an improvement on the 2015 calendar year, but the pace of construction needs to pick up further to give confidence that the target will be met.

Small-scale systems

The Small-scale Renewable Energy scheme creates a financial incentive for individuals and small businesses to install eligible small-scale solar, wind and hydro systems, as well as solar water heaters and air source heat pumps.

Small-scale installations

In 2015–16 a total of 165 800 small-scale systems were installed, bringing the overall total number of installations to 2 544 847. The number of installations has remained strong, but has slowly declined since 2013, following the end of the small-scale technology certificate multiplier and changes to previous generous state and territory feed-in tariffs.

SNAPSHOT

165 800 small-scale systems installed in 2015–16.

In total, small-scale installations now have the capacity to generate or displace approximately 9.5 million megawatt hours of electricity each year—enough to power over 1.4 million average Australian households.

Installers must be accredited by the Clean Energy Council and must use panels and inverters listed on the Clean Energy Council's list of approved components.

Table 8: Valid small-scale installations as at 30 June
Solar water heaterAir source heat pumpSolar panel systemWind systemHydro systemAnnual total
2015–1637 6679 347118 774120165 800
2014–1549 8678 987165 816100224 329
2013–1448 1719 911180 95573239 047
Cumulative total (since 2001)787 308198 4611 558 654406182 544 847a

a Certificates can be created up to 12 months after small-scale systems are installed and certificate validation times may also vary, which means complete installation figures will continue to increase.

Small-scale technology certificates created

Under the Small-scale Renewable Energy scheme, participants can create small-scale technology certificates after the installation of an eligible system, based on the amount of electricity a system is estimated to produce or displace. Registered persons and agents created 17 131 645 small-scale technology certificates in 2015–16. Of the certificates created, 91 per cent passed validation and nine per cent failed—requiring remedial action and resubmission.

Under the Small-scale Renewable Energy scheme, participants can create small-scale technology certificates up to 12 months after the system is installed. This means that during 2015–16 we validated small-scale technology certificates created for systems installed in both 2014–15 and 2015–16.

Regulating market demand

Under the Renewable Energy Target, liable entities (typically electricity retailers) have an obligation to purchase and surrender large-scale generation certificates and small-scale technology certificates based on the volume of electricity they purchase each year. The Renewable Energy Target operates on a calendar year basis, with liable entities required to acquit their liability for the assessment year by 14 February each year (or the next working day). They surrender large-scale generation certificates annually and surrender small-scale technology certificates quarterly.

Liable entities may acquire renewable energy certificates at any time and hold them in their Renewable Energy Certificate Registry (REC Registry) accounts.

Certificate prices

In 2015–16 the spot market price for large-scale generation certificates ranged from $51.70 to a record high of $84.05. The increasing large-scale certificate spot price during the year indicates that demand for existing certificates is increasing, a signal that the market requires new build of power stations to supply enough certificates for liable entities to continue to meet their regulatory obligations. High certificate prices are likely to decrease the surplus and we have advised relevant entities accordingly.

The 2015–16 spot market for small-scale technology certificates held steady around the fixed price for certificates sold through the Small-scale Technology Clearing House price of $40.14

Certificates surrendered

In the 2015 assessment year15 19 175 716 large-scale generation certificates and 20 586 873 small-scale technology certificates were surrendered against 2015 liability.

Shortfall charge

If liable entities fail to surrender the required number of renewable energy certificates by the due date, they are required to pay a shortfall charge of $65 per certificate, which is not tax deductible. Liable entities may be eligible to carry forward a large-scale generation certificate shortfall within 10 per cent of their total certificate liability before being required to pay the large-scale generation shortfall charge.

For the 2015 assessment year, three liable entities had a large-scale generation shortfall within the 10 per cent margin. These shortfalls will be carried forward to the liable entities' 2016 large-scale generation certificate liability. Seven liable entities had large-scale generation shortfall above the 10 per cent margin and were required to pay the large-scale generation shortfall charge.

One liable entity had a small-scale technology shortfall for Quarters 1 to 3 reporting, and was required to pay the small-scale generation shortfall charge.

SNAPSHOT

More than 99% compliance by liable entities in the 2015 assessment year.

Compliance rate

Liable entities maintained a compliance level of more than 99 per cent during the 2015 assessment year, which is consistent with previous years.

Image acknowledgment: Courtesy of AGL. Macarthur Wind Farm, Victoria, Renewable Energy Target.

IN 2015–16 THE SPOT PRICE OF LARGE-SCALE GENERATION CERTIFICATES REACHED A RECORD HIGH OF $84.05.

Image acknowledgment: Courtesy of AGL. Macarthur Wind Farm, Victoria, Renewable Energy Target.

Table 9: Renewable Energy Target liabilities discharged as at 30 June
(for the 2014 and 2015 calendar years)
Description20142015
Number of liable entities116120
Percentage of large-scale generation certificate liability discharged99.899.4
Percentage of small-scale technology certificate liability discharged99.899.9

Notes: As the Renewable Energy Target operates on a calendar year basis, liabilities discharged are presented in calendar years. In addition, we have amended the 2014 figures for the number of liable entities and percentage of large-scale generation certificate liability discharged from numbers reported last year, due to revisions made by liable entities on their 2014 surrenders.

Industry assistance (exemptions)

In June 2015 the Renewable Energy (Electricity) Act 2000 was amended to allow for full exemption from liability for emissions-intensive trade-exposed activities. As a result, during 2015–16 we amended 150 partial exemptions certificates already issued for 2015 to full exemption certificates. The total number of valid exemption certificates for 2015 year was 163, reflecting 38 million megawatts hours.

During 2015–16 we received 179 applications for 2016 exemption certificates. As at 30 June 2016 we had issued 145 certificates and refused one, and were waiting for applicants to provide additional information for the remainder not yet issued. The partial exemption for the 2016 exemption certificates issued was approximately 41 million megawatt hours.

Enabling the market to operate

REC Registry

The REC Registry is a secure web-based system for all Renewable Energy Target transactions including creating, registering, selling, trading and surrendering certificates. It also includes several public registers that provide information about the Renewable Energy Target.

We made changes this year so that the REC Registry now also provides a streamlined process for accrediting power stations, with both the application and assessment process happening through the REC Registry.

This helps to reduce the administrative burden for both applicants and our staff, by allowing information to be stored in an easy to access online form.

The REC Registry continues to enable the market to operate—supporting both supply and demand by providing secure, convenient, user-friendly and efficient processes to create, register, sell, trade and surrender certificates.

Registered persons and agents

Only registered persons or agents can create renewable energy certificates. In 2015–16 we processed 82 applications for registered agents and 180 applications for registered persons, bringing the total to 1 615 registered agents and 7 669 registered persons. We processed all applications within the required six-week timeframe.

Registration of solar water heaters

To be eligible for the Small-scale Renewable Energy scheme, solar water heaters must be included in the register of solar water heaters. During 2015–16 there were three application rounds for solar water heater and heat pump models to be included in the register, with 696 applications approved. We processed all applications within the required 180-day timeframe and published the register as required during the year.

Inspections of small generation units

Each year, we inspect a statistically significant number of installed small generation units for compliance with the Small-scale Renewable Energy scheme. The inspections program allows us to monitor increased installation demand resulting from Renewable Energy Target incentives.

To be eligible for small-scale technology certificates, the small generation unit's panels and inverter must be listed on the Clean Energy Council list of approved components, and the system must be installed by an electrician who is accredited by the Clean Energy Council.

Responsibility for electrical safety is a matter for state and territory electrical safety regulators. As part of our role, we publish regular updates on inspection results on our website and provide updates to state and territory electrical safety regulators and the Clean Energy Council.

We received 2 898 reports on solar photovoltaic system inspections conducted in 2015–16. The proportion of systems assessed as substandard in 2015–16 was 20 per cent. The proportion of systems assessed as unsafe decreased from 4.7 per cent in 2014–15 to 4.0 per cent in 2015–16. The variation in rates of unsafe systems between individual years could be due to the limited sample size in any one year. All systems categorised as unsafe are rendered unsafe by the inspectors and referred to the relevant state or territory electrical regulator to take appropriate action.

Footnotes

10 On 23 June 2015 the Australian Parliament passed the Renewable Energy (Electricity) Amendment Bill which reduced the Large-scale Renewable Energy Target from 41 0000 gigawatt hours to 33 000 in 2020. This will result in more than 23.5 per cent of Australia's electricity derived from renewable sources by 2020. The required gigawatt hours of renewable source electricity from 2017 to 2019 were also adjusted to reflect the new target.

11 Refer to the Glossary for definition.

12 Based on average household electricity consumption of 122.3 kilowatt hours per week. Australian Bureau of Statistics, Household Energy Consumption Survey, Australia: Summary of Results,
www.abs.gov.au/ausstats/abs@.nsf/Lookup/4670.0main+features132012.

13 Committed build figures are based on the Clean Energy Regulator's best understanding of publically available information as at 30 June 2016.

14 Market prices are sourced from external sources.

15 The Renewable Energy Target works on a calendar year.

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