This means liable entities (generally electricity retailers) are required to surrender approximately 27.5 million large-scale generation certificates (LGCs) to meet their Large-scale Renewable Energy Target (LRET) obligations for 2018.
This figure is derived by subtracting more than 1.1 million LGCs from the approximate 28.6 million LGCs required to meet the 2018 annual target. The 1.1 million adjustment is the difference between the total liability required under the scheme and the cumulative annual targets up to two years ago (i.e. 2016).
Liable entities that do not surrender sufficient LGCs to meet their obligations are required to pay a non-tax deductible shortfall charge, with a refund available in certain circumstances.
The RPP aims to meet the annual target for renewable electricity set out in the legislation each year. As the annual target increases each year until 2020, the RPP also increases each year. From 2021 to 2030, the annual target is 33,000 GWh.
Under the LRET, liable entities source and surrender LGCs to the agency to meet their Renewable Energy Target obligations.
The number of LGCs each liable entity is required to surrender each year is calculated by multiplying the amount of electricity acquired in megawatt hours (minus any exemption certificates) by the RPP for that compliance year.
Each year the RPP must be set by regulation by 31 March of that year, otherwise a default percentage is applied.
To set the RPP each year, we recommend a percentage to the Minister for the Environment and Energy (the Minister) using a combination of actual data and estimates for the matters that must be considered, including the:
The Minister may also take into account other matters in determining the RPP.
The renewable electricity required to meet the 2018 annual target is 28,637 gigawatt hours (GWh) (28.6 million LGCs).
The amount of electricity to be acquired is based on the reported relevant acquisition data from the most recent year available in the REC Registry at the time the percentages are calculated in January of the setting year. This is data from two years prior to the setting year, i.e. in setting the 2018 RPP, relevant acquisitions data for 2016 is used. This dataset incorporates subsequent changes in the amounts initially reported by liable entities to address errors or resolution of a disputed amount.
This process assumes electricity demand remains relatively stable. As the Australian Energy Market Operator predicts electricity demand will be flat in the short to medium term, this approach is considered robust. If electricity demand changes significantly, an update to the market will be provided prior to commencement of the setting year.
The estimated relevant acquisition of electricity used in setting the 2018 RPP is 212,400 gigawatt hours (GWh).
The reported total relevant acquisitions for 2017, as at February 2018, are 211,800 GWh. This amount is subject to change as adjustments are made as a result of compliance and assessment activities.
Each year the relevant acquisition and exemption amounts reported to the Clean Energy Regulator are different to the estimates used for setting the RPP in that year. An annual adjustment is made to correct for differences between the estimates and actual amounts. There may also be changes in the amount of relevant acquisitions reported by liable entities, for example because of error or resolution of a disputed amount.
This adjustment is calculated as the difference between the sum of the annual targets and the sum of liability that has been required under the scheme up to two years previously (i.e. in 2018, up to 2016). The ‘liability required’ is calculated by multiplying the total amount of relevant acquisitions minus exemptions reported by all liable entities by the RPP for each year. This approach ensures that the annual renewable energy targets are progressively met.
The use of the amount of liability rather than the amount of certificates surrendered ensures liable entities that meet their obligations are not required to make up any shortfall caused by non-surrender of certificates by other entities. Liable entities that meet their obligations will have any over- or under-surrender of LGCs from previous years balanced out in the following setting years, whereas entities that do not fulfil their liability obligations are required to pay a shortfall charge.
Businesses that undertake Emissions-Intensive Trade-Exposed (EITE) activities receive exemption certificates (in MWh) for the electricity used in undertaking the EITE activity. Business exchanges these certificates with their electricity retailer for reduced electricity costs. Ultimately the certificates are surrendered to us by the electricity retailer to reduce their liability.
Each year we estimate the amount of exemption that applies to EITE activities and this amount is deducted from the liability estimate for that year.
In 2018 the estimated exemption amount is 40,900 GWh.
The matters the Minister must consider above can be expressed by the formula:
It is open to the Minister to also consider other matters in determining the RPP. In 2018 no other matters were considered.
In 2018 the calculation of the RPP was based on the following actual amounts or estimates:
The formula expresses the matters the Minister must consider, however the Minister is not restricted to only considering these matters.
If the RPP is not set by 31 March in the setting year, a default value automatically comes into force. This must be calculated using the formula:
To date the RPP has been set by regulation by the 31 March and the default value has not been applied. The default RPP for 2018 is:
All annual Large-scale Renewable Energy Targets from 2001 to 2030, and the RPPs and default values to 2018, are set out in the table below. The table reflects changes arising from legislative changes, as explained in more detail in the downloadable data.
Data as at 26 March 2018.
documentAsset:LRET 2001-2030 Annual targets and renewable power percentages
The Renewable Energy (Electricity) Regulations 2001 can be amended up to 31 March each year to set the RPP. The Clean Energy Regulator publishes the percentage when the amendment is made.
If the amendment is not made by 31 March, a default formula will apply for that year. For more information about the default formula refer to section 39 (2) (b) of the Renewable Energy (Electricity) Act 2000.
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