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Calculating certificate liability

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25 September 2018
RET

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Under the Renewable Energy Target, liable entities are required to ​ surrender certificates. If a liable entity does not surrender the right amount of certificates it may incur shortfall charges.

The Clean Energy Regulator recommends that liable entities plan ahead to calculate their certificate liability and obtain certificates at least two weeks prior to a surrender deadline.

Reduced acquisitions

Reduced acquisitions are used to calculate the required amount of large-scale generation certificates(LGCs) and small-scale technology certificates (STCs) a liable entity has to surrender for the year or quarter.

A liable entity's reduced acquisitions are calculated based on relevant acquisitions and networks exemption and exemption certificates as outlined below.

Reduced acquisitions=Relevant acquisitionsExemption certificates

​For information about determining and calculating relevant acquisitions, see acq​​uisitions and networks exemption.

Calculating large-scale generation certificate liability

​Under the Large-scale Renewable Energy Target, liable entities must surrender LGCs annually through the REC Registry, when they lodge their energy acquisition statement.

LGC liability=Reduced acquisitions×Renewable power percentage Carried forward surplus from the previous year+Carried forward shortfall from the previous year

LGC surplus may be created when a liable entity surrenders LGCs above the calculated LGC liability for a year. As shown above, a liable entity can use carried forward surplus to acquit their LGC liability or maintain a carried forward surplus for a future year. Liable entities cannot sell or transfer carried forward surplus to another liable entity, so it is recommended that liable entities do not create too much carried forward surplus that is unlikely to be used.

Carried forward shortfall occurs where a liable entity does not fully acquit its LGC liability, but surrenders more than 90 percent of the calculated LGC liability – refer to section 36 of the Renewable Energy (Electricity) Act 2000 (the Act).

Calculating small-scale technology certificate liability

Under the Small-scale Renewable Energy Scheme, a liable entity must surrender an amount of STCs each quarter. As the actual electricity acquisitions for the assessment year are not known in the first three quarters, an estimate is used to determine how many STCs must be surrendered for those quarters. In most cases, this amount is based on the previous year's reduced acquisitions lodged in the energy acquisition statement. In the fourth quarter, the actual reduced acquisitions for the assessment year are used to finalise STC liability for the year.

Calculating STC liability (required surrender amount) for quarters one to three

Liable entities calculate their STC liability for quarters one to three of the assessment year based on their estimated or actual reduced acquisitions, determined through one of the methods described below.

  • Previous year's reduced acquisitions – amount lodged or assessed in the energy acquisition statement for the previous assessment year. This is the method used in the majority of cases.
  • Variation amount under section 38AF of the Act - existing liable entities that vary the required surrender amount.
  • Proposed amount under section 38AG of the Act​ - new liable entities or liable entities that did not lodge an energy acquisition statement the previous year.
  • Assessment year's reduced acquisitions:
    • Under section 38AH of the Act - this occurs when there is a default assessment for new liable entities or liable entities that did not lodge an energy acquisitions statement for the previous year.
    • Under section 38AF(7) of the Act - this occurs when a variation amount under section 38AF has been used, but the amount lodged in the energy acquisition statement exceeds the variation amount by more than 10 per cent.

Once the estimated or actual reduced acquisitions are determined, liable entities can then calculate their STC liability for quarters one to three by using the calculations outlined below.

Liable entities can view their required surrender amounts and surrender STCs via their REC Registry account.

STC required surrender amount for quarter one of an assessment year

STC liability quarter 1=Estimated or actual reduced acquisitions×Small-scale technology percentage×35 per cent

STC required surrender amount for quarter two of an assessment year

STC liability quarter 2=Estimated or actual reduced acquisitions×Small-scale technology percentage×25 per cent

STC required surrender amount for quarter three of an assessment year

STC liability quarter 3=Estimated or actual reduced acquisitions×Small-scale technology percentage×25 per cent

Calculating STC liability (required surrender amount) for quarter four

Liable entities calculate their annual STC liability for quarter four of the assessment year based on their reduced acquisitions and the factors outlined below - refer section 38AA and 38AE of the Act. Liable entities surrender STCs for quarter four with the lodgement of their annual energy acquisition statement and STC shortfall statement through their REC Registry account.

STC required surrender amount for quarter four of an assessment year

STC liability quarter 4 = Reduced acquisitions lodged in the energy acquisitions statement × Small-scale technology percentage Total required surrender amounts for quarters 1-3

Carried forward surplus and certificate shortfall

Carried forward surplus may be created when a liable entity surrenders STCs above the required surrender amount for a quarter. Liable entities have the option to use carried forward surplus to acquit a future quarterly required surrender amount. Entities cannot sell or transfer surplus STCs to another entity.

Liable entities cannot carry forward a STC shortfall. If a STC shortfall occurs, the liable entity will be required to pay the non-refundable small-scale technology shortfall charge.

Applying to set a required surrender amount for quarters one to three (new or existing liable entities)

Liable entities that did not lodge an energy acquisition statement before 1 April in the assessment year should apply to set a required surrender amount for quarters one to three of the assessment year under section 38AG of the Act. This could apply to a new liable entity or an existing liable entity that failed to lodge an energy acquisition statement or is a liable entity intermittently.

A company or individual is a liable entity if they make a relevant acquisition of electricity.

If you are a new liable entity complete the following steps:

  1. apply for a REC Registry account or upgrade your REC Registry account
  2. contact the agency to discuss liability
  3. complete the Documentasset:CER​-RET-008 Application to set the required surrender a​mount for the first three quarters of the assessment year, and
  4. read all relevant liable entity information provided on this website, including certificate liability calculation.

If you are an intermittent liable entity complete the following steps:

  1. contact the agency, and
  2. complete the Documentasset:CER-RET-008 Application to set the required surrender amount for the first three quarters of the assessment year.​

If a liable entity fails to lodge an application, the agency will complete a default assessment of the required surrender amount for quarters one to three under section 38AH of the Act​. A default assessment may result in STC shortfalls and small-scale technology shortfall charges, as well as interest charges.

Applying to vary a require ​surrender amount for quarters one to three (existing liable entities)

Liable entities that lodged an energy acquisition statement for the previous year before 1 April in the assessment year may apply to the agency to vary their required surrender amount for the first three quarters of the assessment year. This would be necessary if the entity's reduced acquisitions in the assessment year were substantially different to the previous year's reduced acquisitions. A decrease in reduced acquisitions could be due to a variety of reasons including:

  • loss of a large customer or multiple customers
  • issuance of an exemption certificate
  • cessation of trade
  • a merger with another corporation, and
  • migration of customers between entities.

Liable entities should carefully consider their variation amount. If the assessment year's reduced acquisitions exceed the variation amount by more than 10 per cent, the assessment year's reduced acquisitions (amount lodged in the energy acquisition statement) will be used to recalculate the required surrender amounts for the first three quarters – refer to Section 38AF(7) of the Act. Contact the agency for techniques on mitigating the effects of exceeding the variation amount.

Liable entities may apply to vary a previous determination under section 38AF of the Act in an assessment year if their circumstances change. However, if a liable entity makes an application to vary a determination previously made under section 38AF, it will not give the liable entity the ability to surrender additional certificates for a previous quarter. Nor will it revive STCs previously surrendered pursuant to the previous determination. Such STCs will become a carried forward surplus that can be used to acquit future quarters.

Therefore, liable entities should carefully consider when STCs are surrendered if an application is lodged.

An application under subsection 38AF(1) of the Act or a variation to a previous determination application in relation to an assessment year must be made before 1 October in the assessment year. If 30 September falls on a weekend or a public holiday, the application must be made before the end of the next business day.​

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