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Surplus of large-scale generation certificates after final surrender

22 February 2018

A healthy surplus of renewable energy certificates remains in the Renewable Energy Target market following final surrender by liable entities for the 2017 assessment year. The surplus should remain healthy and support liquidity in the market as supply from new projects is delivered in 2018.

Under the Renewable Energy Target, liable entities – generally electricity retailers – are required to surrender a number of renewable energy certificates proportional to their energy acquisition for the calendar year.

Across both the Large-scale Renewable Energy Target and Small-scale Renewable Energy Scheme, 95.5 per cent of certificates were surrendered on time by liable entities, up from 93.8 per cent for the 2016 assessment year.

Under the Large-scale Renewable Energy Target, entities who do not surrender at least 90 per cent of their liability are required to pay a $65 shortfall charge for each certificate not surrendered.

Clean Energy Regulator Chair David Parker said, this year the on time surrender rate was 93.3 per cent, up from 89.3 per cent last year and the amount of shortfall charges have substantially decreased, from $143 million last year to $89.5 million.

“Following final surrender, there remains 9.4 million large-scale generation certificates in the market for future assessment years. Contributing to the surplus, some entities have chosen to take the option to carry forward less than 10 per cent of their liability, without paying the shortfall charge,” Mr Parker said.

“With the large amount of additional new build coming on this year and next, we are very confident there will be more than adequate surplus of certificates through to 2020."

“As the market starts to see the pace of build this year, and an increasing supply of certificates entering the market, we expect spot prices for certificates to moderate further.”

The Clean Energy Regulator has published the full certificate surrender data, and updated market information today showing the momentum of build in the Renewable Energy Target market.

About the Renewable Energy Target

The Renewable Energy Target is an Australian Government scheme designed to encourage the additional generation of electricity from sustainable and renewable sources and reduce emissions of greenhouse gases in the electricity sector.

The Renewable Energy Target works by allowing both large-scale power stations and the owners of small-scale systems to create certificates for every megawatt hour of power they generate. Certificates are then purchased by electricity retailers who sell the electricity to householders and businesses. These electricity retailers also have legal obligations under the Renewable Energy Target to surrender certificates to the Clean Energy Regulator, in percentages set by regulation each year. This creates a market which provides financial incentives to both large-scale renewable energy power stations and the owners of small-scale renewable energy systems.

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