The Renewable Energy Target creates demand for renewable energy by requiring certain entities to surrender an amount of certificates in proportion to the electricity they acquire in an assessment year. This is referred to as liability. A renewable energy certificate is equal to one megawatt hour (MWh) of renewable energy generated from a renewable energy source. If an entity does not surrender the right amount of certificates, it may be required to pay a shortfall charge. Emissions-intensive trade exposed entities are issued with exemption certificates which reduce the amount of certificates that a liable entity is required to surrender in an assessment year. There are some instances where acquisitions can be exempt from liability.
Liable entities are classified as an individual or company who is the first person to acquire electricity on a grid which has an installed capacity of 100 megawatts or more. They are usually electricity retailers.
If an entity acquires electricity sporadically between assessment years they may be classified as an intermittent liable entity and will be required to
report liability and
surrender certificates for the years that they are liable.
Liable entities are liable for the electricity acquired each year. To acquit liability, entities must surrender an amount of
large-scale generation certificates (LGCs) and
small-scale technology certificates (STCs) equal to their liability.
Certificate liability is determined by applying percentages (the
renewable power percentage for LGCs and the
small-scale technology percentage for STCs) to an entity's electricity acquisitions for that year. Entities acquit their liabilities by surrendering the required number of certificates to the Clean Energy Regulator for:
The surrender of certificates is a legal requirement and works to increase the portion of renewable energy generated and supplied to the Australian electricity market.
Entities that carry out
emissions-intensive trade-exposed (EITE) activities may be eligible for exemption certificates.
EITE activities are specified in the
Renewable Energy (Electricity) Regulations 2001. They include but not limited to aluminium smelting, zinc smelting, petroleum refining and newsprint manufacturing.
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