The Renewable Energy Target aims to encourage additional renewable energy and reduce greenhouse gas emissions in the electricity sector.
The scheme was introduced in 2001, and then split into two in 2011:
In 2015 the Parliament passed legislation to revise the Large-scale Renewable Energy Target from 41 000 gigawatt hours to 33 000 gigawatt hours.
The Renewable Energy Target works by creating a market for renewable energy certificates17, which drives investment in the renewable energy sector.
This year saw a notable increase in the capacity of accredited renewable energy power stations. This indicates continued market interest and returning investor confidence in the renewable energy industry. We also saw an increase in the number of small-scale systems installed, reversing the gradual downward trend since 2011. The average size of systems being installed continues to rise.
114% increase in accredited generation capacity of new renewable energy power stations compared to 2015–16
19.4 million megawatt hours of additional electricity generated by accredited renewable energy power stations in 2016–17 compared to 15.9 million megawatt hours 2015–2016
24% more small-scale systems were validated in the first half of 2017 compared to the same time last year
10.6 million megawatt hours generated or displaced by small-scale systems compared to 9.5 million megawatt hours in 2015–16
We publish details about the operation of the
Renewable Energy (Electricity) Act 2000 in an
annual administrative report, as required by the legislation. These reports present data and information about scheme operation and achievements from the previous calendar year. The 2016 report,
Tracking towards 2020: Encouraging renewable energy in Australia, was tabled on 3 May 2017 and is available on our website. More information about meeting the target is available in the
Looking forward section below.
The Large-scale Renewable Energy Target creates a financial incentive to encourage investment in renewable energy power stations like wind and solar farms or hydroelectric power stations.
The number of power stations accredited under the scheme has steadily increased since 2001. In 2016–17 we accredited 90 new power stations, bringing the total since the scheme began to 625. All applications for accreditation were processed within the required six weeks.
90 new renewable energy power stations accredited in 2016–17, bringing the total to
This year saw an increase in investment in large-scale renewable power stations with a capacity of more than one megawatt, and we accredited several power stations with capacity ranging from 11 megawatts to 242 megawatts.
The high number of power stations with capacity of less than one megawatt is evidence of continued growth in participation from commercial and industrial renewable projects participating in the Large-scale Renewable Energy Target.
Generation capacity has increased significantly. The total capacity of all power stations accredited during 2016–17 was 615.5 megawatts. This indicates more new large-scale renewable power stations started generating in 2016–17 than in any other previous year.
Around 84 per cent of the increase in overall capacity has come from three power stations that have capacities in excess of 100 megawatts.
There are around 20 eligible renewable energy sources under the Renewable Energy Target. The most common sources are solar, wind, hydro, biomass19 and waste coal mine gas.
Solar continued to be the dominant fuel source in terms of the number of accredited renewable energy power stations in 2016–17, as it was in 2015–16. This represents a continuing trend in commercial and industrial scale power stations using solar in the 100 to 500 kilowatt (0.1 to 0.5 megawatt) range.
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 2016–17 we validated 19 374 654 large-scale generation certificates compared with 15 949 840 validated in 2015–16. This represents around 19.4 million megawatt hours of additional electricity generated by accredited renewable energy power stations, enough to power about three million homes per year20.
More than 65 per cent of the certificates validated in 2016–17 were from power stations using wind as the energy source, 15 per cent were from hydro, and the remaining were from across biomass, solar and waste coal mine gas energy sources.
Investment activity in renewable energy projects is gathering pace. Investors make informed decisions by analysing the available market data. To assist market participants we have increased the transparency of information by publishing monthly supply and demand information on our website. Our data is one of several sources that investors can rely on to make informed decisions.
Supply data includes details of the development pipeline for large-scale renewable energy projects. This is provided to assist market participants to identify potential investment opportunities.
Supply data also details the number of large-scale generation certificates held in renewable energy certificate registry (REC Registry) accounts. The release of this data helps buyers and sellers to identify each other.
The demand data provides an overview of liable entities and liability information for the previous assessment period21. As well as increasing transparency, releasing this data helps the market monitor the pace of investment over time and track progress towards meeting the 2020 Renewable Energy Target.
Image acknowledgment: Clean Energy Regulator. Wind Farm, Albany, Western Australia, Renewable Energy Target.
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 pumps22.
In 2016–17 210 659 small-scale systems were validated, bringing the overall total number of validated systems in Australia to 2 755 506.
Since 2011, the number of validated small-scale systems had been declining each year. In 2016–17 this trend reversed, with a 24 per cent increase in the number of systems validated in the first half of 2017, compared with the same time last year. Factors that may be contributing to the recent increase could include the falling cost of solar systems and the rising cost of electricity.
In total, small generation units now had a cumulative capacity of 5826 megawatts, as at 30 June 2017. This equates to approximately 10.6 million megawatt hours of electricity generated or displaced23 each year based on estimated system performance–enough to power over 1.6 million average Australian households24.
Increase in the number of small-scale systems bringing the total to more than
Under the Small-scale Renewable Energy Scheme, participants can create small-scale technology certificates following the installation of an eligible system. The number of certificates is based on the amount of electricity a system is estimated to produce or displace depending on the technology.
Small-scale technology certificates can be created up to 12 months after the system is installed. This means during 2016–17 we validated small-scale technology certificates created for systems installed in both 2015–16 and 2016–17.
We validated 18 620 810 small-scale technology certificates in 2016–17. This is a significant increase from 15 303 013 small-scale technology certificates validated last year. This is despite a reduction in the deeming period, which reduced the amount of certificates small-scale solar systems received. The reasons for the increase include a higher number of systems installed and an increase in the average capacity of systems.
This year we have implemented a data matching program with the Australian Energy Market Operator (AEMO) and state and territory energy efficiency regulators.
We have been collaborating with AEMO to cross-check data for compliance across all our schemes. This year, for the first time, we automated our data exchange capability to detect and prevent ineligible claims for small-scale technology certificates using electricity meter data. This data is automatically updated every three hours.
Matching similar electricity metering data maintained by AEMO helps us determine the probability that a small-scale solar system was installed. By enhancing compliance measures in this way, we can more easily prevent, detect and respond to non-compliance and fraud, and more effectively allocate resources to higher risk installations. Adding this capability is timely, given the increase in small-scale installations during the reporting year.
Industry has welcomed the initiative, which supports broader integrity of the renewable energy industry.
Additionally, to ensure the abatement achieved under the Emissions Reduction Fund is credible and the integrity of the scheme is not undermined we have implemented a data exchange mechanism with state and territory agencies. Emissions Reduction Fund applications for energy efficiency projects are checked against state and territory energy efficiency programs to ensure participants have not already received an entitlement.
Both data matching mechanisms do not rely on additional data from our clients. Rather, the data matching program is about smarter use of the data already available to government to improve compliance.
Image acknowledgment: Clean Energy Regulator. Small-scale solar panel installation, Melbourne, Victoria, Renewable Energy Target.
Each year, we inspect a statistically significant number of installed small generation units to verify compliance with the Small-scale Renewable Energy Scheme.
To be eligible to create small-scale technology certificates, the small generation unit’s solar panels and inverter must be on the Clean Energy Council list of approved components, and the system must be installed by a Clean Energy Council accredited electrician.
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 reports to state and territory electrical safety regulators and the Clean Energy Council.
We received 3380 reports on solar photovoltaic system inspections conducted in 2016–17. The proportion of systems assessed as unsafe26 has steadily decreased from 4.7 per cent in 2014–15 to 4.0 per cent in 2015–16 and 1.9 per cent in 2016–17.
This significant reduction in unsafe systems reflects the collaboration of industry and regulators to address the DC isolator issue that made up the majority of unsafe systems. Previous compliance inspections found that a majority of unsafe and substandard installations are attributed to water ingress of DC isolator switches. This group worked together to improve the Clean Energy Council installer training and guidelines and drove changes to the Australian standards and improvements to consistency of inspections. As the inspection program looks at installs over the past year, we are now seeing the results through lower levels of unsafe systems.
If an inspector finds an unsafe system they are required to render it safe and notify all interested parties, including the homeowner, the installer, the Clean Energy Council and the relevant state or territory electrical safety regulator to take appropriate action. Systems found to be sub-standard27 are reported to the relevant state or territory electrical safety regulator and the Clean Energy Council.
The proportion of systems assessed as unsafe has steadily
decreased, from 4.7 per cent in 2014–15 to 4.0 per cent in 2015–16 and
1.9 per cent in 2016–17
This year our compliance focus area for the Small-scale Renewable Energy Scheme was ‘enhanced monitoring of integrity of claims for small-scale renewable energy certificates’.
During 2016–17 we completed a number of projects to strengthen the Small-scale Renewable Energy Scheme compliance capability, including the following examples:
Tracking towards 2020: Encouraging renewable energy in Australia it was noted that supply and demand for large-scale generation certificates would be tightly balanced for the 2018 compliance year28. The trends we observed in the first half of 2017 suggest that this is likely to remain the case.
The large-scale generation certificates spot price started July 2016 at $85.50 and climbed to a new record high of $89.50 during mid-October 2016 ending the financial year at $79. The monthly average spot price for 2016–17 is shown in the graph below29.
At the end of 2016–17, the small-scale technology certificate clearing house went into surplus for the first time since early 2016. The clearing house provides a mechanism when liquidity is low and facilitates a mechanism for small-scale technology certificates to be traded at a capped price of $40. If the high rate of small-scale technology certificate creation continues, the surplus is likely to remain for an extended period.
The increased level of small-scale technology certificate creation means there is more supply in the market outside the clearing house, which has led to a slight reduction in the spot price for small-scale technology certificates that finished the 2016–17 financial year at $37.25.
Both small-scale technology and large-scale generation certificate prices will change based on supply and demand and no future trends should be assumed from prices published in this report.
Under the Renewable Energy Target, liable entities (mainly 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.
Each entities’ liability is determined by the Renewable Power Percentage (RPP) and Small-scale Technology Percentage (STP) set by the Minister for the Environment and Energy. The 2017 RPP and STP are available on
The small-scale technology percentage.
The Renewable Energy Target operates on a calendar year basis, with liable entities required to acquit their liability for the previous year by 14 February. They surrender large-scale generation certificates annually and surrender small-scale technology certificates quarterly to meet any actual or anticipated liability for the year.
By 14 February 2017, liable entities had surrendered a total of 19 676 342 large-scale generation certificates and 16 678 285 small-scale technology certificates against their 2016 liability.
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 can generally carry forward a large-scale generation certificate shortfall that is within 10 per cent of their total certificate liability before they are required to pay the large-scale generation shortfall charge.
Of the 119 liable entities for 2016, seven had a large-scale generation shortfall within the 10 per cent margin. These shortfalls will be carried forward to those liable entities’ 2017 large-scale generation certificate liability.
A total of 15 liable entities had a large-scale generation shortfall above the 10 per cent margin and were required to pay the large-scale generation shortfall charge.
Two liable entities had a small-scale technology shortfall and were required to pay the small-scale generation shortfall charge. All entities who do not surrender 100 per cent of their liability in certificates are listed on our website.
Liable entities’ combined surrender rate for large-scale generation and small-scale technology certificates for 2016 was 93.8 per cent. This is a decrease on surrender rates in earlier years.
This drop in the surrender rate is attributed to two of the 15 retailers mentioned above that incurred significant shortfalls under the Large-scale Renewable Energy Target. They paid a combined total of $131 million in shortfall charges, representing 9.5 per cent of the total obligation for 2016.
We prompt, assist and provide information for liable entities to meet their obligations under the scheme. In the lead up to the surrender deadline we were clear with liable entities that intentional payment of the shortfall charge does not meet the objectives of the scheme as it does not support new renewable energy generation.
We issue exemption certificates for emissions-intensive trade-exposed entities that are eligible for exemption under the
Renewable Energy (Electricity) Act 2001.
We received 162 applications for exemption certificates for the 2017 compliance year. As at 30 June 2017 we had issued 100 per cent of exemption certificates. This was significantly higher than the same time in 2016 when 84 per cent of exemption certificates had been issued. The total amount for 2017 exemption certificates was approximately 40 million megawatt hours.
We reissued 17 exemption certificates from 2016 because of liable entity changes or a facility using multiple liable entities at the same time. We issued a further three exemption certificates due to production ceasing at the site.
We provide the REC Registry as the secure online system for all Renewable Energy Target transactions. The REC Registry enables 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. In 2016–17 the REC Registry was available to clients 99.9 per cent of the time, including scheduled maintenance.
Tracking towards 2020: Encouraging renewable energy in Australia stated that the target is achievable provided the pace of investment at the end of 2016 continued in 2017. For satisfactory progress towards the 2020 target, we consider 3000 megawatts will need to be committed in 2017, in addition to the 2069 megawatts that was committed or probable in 2016. A further 1000 megawatts will be needed in 2018. The earlier this capacity is built, the more certificates available to electricity retailers to meet their obligations in future years.
Tracking towards 2020: Encouraging renewable energy in Australia was published in May 2017, investment has continued to firm and the target is likely to be met.
During 2016–17, 40 large-scale renewable energy projects with a combined capacity of 2458 megawatts were committed. The momentum in new project commitments observed in late 2016 continued in the first half of 2017. Committed projects grew by 1013 megawatts in the last half of 2016 and by a further 1445 megawatts in the first half of 2017.
In addition, during the first half of 2017 we identified a further 1184 megawatts in utility-scale projects that are probable, where we have a high degree of confidence they will proceed.
2020 Large-scale Renewable Energy Target
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