The 2017 renewable power percentage (RPP) is 14.22%.
This means liable entities (generally electricity retailers) are required to surrender in February 2018 approximately 25.2 million large-scale generation certificates (LGCs) to meet their Renewable Energy Target (RET) obligations for 2017.
This figure is derived by subtracting over 0.8 million LGCs from the approximate 26 million LGCs required to meet the 2017 annual target. The 0.8 million adjustment is the difference between estimates made two years ago (i.e. 2015) for that setting year and the actual amounts.
Liable entities that do not surrender sufficient LGCs to meet their obligations are required to pay a non-tax deductible shortfall charge of $65 for each LGC short, with a refund payable in certain circumstances.
Under the Large-scale Renewable Energy Target, liable entities source LGCs to meet their renewable energy obligations.
The number of certificates each liable entity needs to source and then surrender to us each year is in proportion to the amount of electricity they acquire. Liable entities calculate the number of certificates they need to surrender each year by multiplying the amount of electricity they acquire in megawatt hours (minus any exemption certificates) by the RPP for that compliance year.
The RPP for a year is set by regulation by 31 March of that year. The agency provides advice to the Minister for the Environment and Energy (the Minister) on the RPP each year to inform this process and publishes the RPP when the regulation is made.
Each year the Minister must consider a number of matters when setting the RPP, including the:
When calculating the RPP, the agency uses a combination of actual data and estimates as set out below for each of the above matters.
The renewable electricity required for each setting year is set out in section 40 of the Renewable Energy (Electricity) Act 2000. The 2017 annual target is 26 031 GWh. As the annual target increases each year until 2020, the RPP also increases each year. From 2021 to 2030, the annual target remains at 33 000 gigawatt hours (GWh).
A GWh is 1000 megawatt hours (MWh) so the GWh target for 2017 is equivalent to just over 26 million LGCs.
Until 2017, estimating the amount of electricity to be acquired - the relevant acquisition forecast - used two data sets of past electricity demand:
Future demand was then forecast based on the percentage change in the NEM and the estimated change in the non-NEM from previous years.
For the 2018 and future RPPs, the agency will adopt a simplified process that uses the reported relevant acquisition data from the most recent year available in the REC Registry. This means data from two years prior to the setting year is used as it incorporates subsequent changes in relevant acquisition data that can arise from errors or resolution of a disputed amount. For example in setting the 2018 RPP, relevant acquisition data for 2016 will be used.
This is the most recent data available when the percentages are calculated in January of the setting year and enables the RPP to be set by 31 March of that year, in accordance with the legislation.
This approach was found to be more accurate than the previous method and also provides greater transparency to the market. As AEMO predicts electricity demand will be flat in the short to medium term, we consider this approach to be robust. If electricity demand changes by at least 3 per cent between years, the Clean Energy Regulator will provide an update to the market.
Each year the relevant acquisitions reported to the Clean Energy Regulator are different to the estimate of liable electricity used for setting the RPP in that year. Annual adjustments are made to correct the cumulative difference and to ensure that the annual renewable energy targets are progressively met.
That is, the difference between the sum of renewable electricity required (i.e. annual targets) and the sum of liability required is calculated and used to adjust for disparities between the estimates made two years ago for the setting year and the actual amounts from that year.
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.
Differences arise due to the estimates for liable electricity and exemptions in previous years varying from later verified 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.
Using the amount of liability rather than the amount of certificates surrendered in this calculation ensures that 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. Further information can be found on industry assistance.
Each year we estimate the amount of exemption that applies to EITE activities and this amount is deducted from the liable electricity estimate for that year.
The matters the Minister must consider above can be expressed by the formula:
In 2017 the calculation of the RPP was based on the following actual amounts or estimates:
Note that in setting the 2017 RPP, the previous method of calculating the estimated amount of electricity to be acquired (217 700 000) was used. We expect this amount will be higher than the actual amount and this will result in a small increase (about 0.5%) in the RPP in 2019; noting that the other matters considered will also influence the RPP.
By the end of 2015, liable entities had a cumulative liability of 782 384 LGCs more than the sum of the annual targets. Consequently this amount was subtracted from the annual target in setting the 2017 RPP.
The higher liability required was primarily due to an under-estimate of liable electricity in setting the 2015 RPP.
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 come into force.
The default RPP for 2018 is 15.64%.
All annual Large-scale Renewable Energy Targets from 2001 to 2030, and the RPPs and default values to 2017, are set out in the table below. The table reflects changes arising from legislative changes.
Data as at 24 March 2017.
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 renewable power percentage. 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, as stated in the Renewable Energy (Electricity) Act 2000. For more information about the default formula refer to
section 39 (2) (b) of the Renewable Energy (Electricity) Act 2000.
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