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The small-scale technology percentage

31 January 2018
RET

The 2017 small-scale technology percentage (STP) is 7.01%.

This means liable entities (generally electricity retailers) are required to surrender by 14 February 2018 approximately 12.5 million small-scale certificates (STCs) to meet their Renewable Energy Target (RET) obligations for 2017.

This figure is derived by subtracting 2.65 million STCs from the estimated 15.1 million supply of STCs in 2017. The 2.65 million STC adjustment is the difference​ between previous years’ STC creations and actual number of STCs surrendered in those years.

Liable entities that do not surrender sufficient STCs to meet their obligations are required to pay a non-tax deductable shortfall charge of $65 for each STC short; with a refund payable in certain circumstances.

About the small-scale technology percentage

The STP aims to balance the supply of STCs by setting an equivalent demand each year. This means each year liable entities will be required to surrender to the agency the same number of STCs as the number of certificates that are estimated to be created in that year, plus or minus an adjustment for previous under- or over-surrender.

Under the Small-scale Renewable Energy Scheme, liable entities source STCs to meet their renewable energy obligations.

The number of STCs 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 STCs they need to surrender each year by multiplying the amount of electricity they acquire in megawatt hours (minus any exemption certificates) by the STP for that compliance year.

The STP 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 STP each year to inform this process and publishes the percentage when the amendment is made.

Each year the Minister must consider a number of matters when setting the STP, including the:

  1. estimated number of STCs to be created for the year
  2. estimated amount of electricity that will be acquired under relevant acquisitions for the year
  3. difference between the number of STCs created for all previous years and the number surrendered in those years, and
  4. estimated amount of electricity to be claimed as exemptions for the year.

In calculating the STP, the agency uses a combination of actual data and estimates as set out below for each of the above matters.

a. Estimated number of STCs to be created for the year

The estimated number of STCs to be created in the ‘setting’ year is an average of accepted estimates of creation numbers provided by qualified consultants engaged by the agency. In 2017, the average of the consultants’ estimates that the agency accepted was 15.1 million STCs. See the consultants’ STP modelling reports.

b. Estimated amount of electricity to be acquired

Until 2017, estimating the amount of electricity to be acquired - the relevant acquisition forecast - used two data sets of past electricity demand:

  • relevant acquisitions from the Renewable Energy Registry (REC Registry), and
  • National Electricity Market (NEM) operational demand, supplied by the Australian Electricity Market Operator.

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 STPs, 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 due to errors or a disputed amount. For example in setting the 2018 STP, 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 STP 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 substantially, the Clean Energy Regulator will provide an update to the market prior to commencement of the setting year.

c. Difference between previous creation estimates and surrenders

Each year the difference between the sum of STCs created in previous years and the sum of STCs surrendered in those years is calculated and used to adjust for disparities between the estimates made up to two years ago and the actual amounts from that year. This cumulative adjustment aims to account for any over- or under- supply of STCs in those years to maintain a supply and demand balance.

Differences arise due to the estimates for the STC creation number, liable electricity and exemptions for earlier years varying from later verified amounts. There may also be changes in the amount of STC creations reported by liable entities for example because of error or resolution of a disputed amount.

Other factors included in the annual adjustment amount are the:

  • 660 000 STCs that were converted to LGCs when the Renewable Energy Target split into the separate large and small-scale schemes, and
  • cumulative total of STCs that have been voluntarily surrendered to comply with Green Power, for altruistic reasons or to maintain compliance with the small-scale renewable energy scheme.

d. Estimated exemptions

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 liability estimate for that year.

Calculating the STP

The matters the Minister must consider above can be expressed by the formula:

2017 small-scale technology percentage

In 2017 the calculation of the STP was based on the following actual amounts or estimates:

Note that in setting the 2017 STP, the previous method of calculating the estimated amount of electricity to be acquired was used. We expect this amount, (217 700 000 MWh) will be higher than the actual amount and this will result in an increase in the STP in 2018; noting that the other factors considered will also have an impact.

Factors affecting the setting of the 2017 STP

By the end of 2016 liable entities had been required to surrender 2 649 809 STCs more than was necessary to maintain the supply-demand balance. This over-surrender of STCs was reflected in the deficit in the STC clearing house. Consequently this amount was subtracted from the amount of STCs required in setting the 2017 RPP.

The over-surrender of STCs was primarily due to an under-estimate of liable electricity in setting the 2015 STP, in addition to the annual adjustment for converted certificates and voluntary surrenders.

Outlook for the 2018 STP

In 2017, the number of STCs created has been significantly higher than expected.

When setting the 2017 STP we used the average of the consultants’ estimates and anticipated approximately 15.1 million STCs would be created in that year. Over the course of the year we observed a substantial increase in the number of solar photovoltaic (PV) systems installed and sought an update to these estimates.

A revised estimate of an average of 20.8 million STC creations for 2017 was prepared in September 2017. As at November 2017, we expect around 21 million STCs will be created and preliminary estimates for 2018 are around 22 million STC creations, although these figures may change.

As the small-scale renewable energy scheme is based on balancing the supply of and demand for STCs, the increased uptake of solar PV systems will result in a higher STP in 2018.

Default small-scale technology percentage

If the STP is not set by 31 March in the setting year, a default value automatically comes into force. This must be calculated using the formula:

The default value would only be calculated as at 31 March if it were to be applied. To date a default STP has not been calculated.

Non-binding small-scale technology perce​ntage

The non-binding STPs provide an indication of what the STP could be in future years. At the time they are published, the non-binding estimates cannot take into account the over- or under-supply of certificates in the previous year and therefore should be considered a general guide only. They are only useful if STC creations in the year are close to the creation estimates used.

The non-binding STP estimates for the next two years are shown below. Due to the unexpected high number of STC creations in 2017, the non-binding estimate for 2018 should not be used as a guide as the 2018 STP is likely to be materially higher.

YearEstimated number of STCs needed for the yearNon-binding small-scale technology percentage
201814.6 million8.06%
201913.9 million7.52%

Previous small-scale technology percentages

The following table provides information on the STP for each year and the non-binding percentages which provide a guide for future STPs.

Data as at 24 March 2017.

Downloadable data

documentAsset:Small-scale technology percentage

  
  
  
  
  
  
  
Important notesFilter
2019
N/A
N/A
N/A
N/A
N/A
7.52
N/A
2018
N/A
N/A
N/A
N/A
8.06
8.31
N/A
2017
15,100,000
-2,649,809
12,450,191
7.01
9.02
9.86
N/A
2016
17,021,500
-64,476
16,957,024
9.68
9.98
10.32
N/A
2015
17,487,667
3,079,771
20,567,438
11.71
10.10
8.49
N/A
2014
16,708,470
1,948,868
18,657,338
10.48
8.98
6.10
One additional non-binding estimate was published for 2014 — 7.69% on 19 October 2012
2013
20,700,000
15,000,000
35,700,000
19.70
7.94
10.62
Three additional non-binding estimates for 2013 were published  — 6.25% on 29 July 2011,  7.87% on 16 December 2011 and 18.76% on 19 October 2012
2012
22,306,000
22,480,000
44,786,000
23.96
16.75
N/A
Two additional non-binding estimates were published for 2012 — 20.87% on 29 July 2011 and 23.95% on 16 December 2011
2011
28,000,000
N/A
28,000,000
14.80
N/A
N/A
N/A
For more information, see the

modelling reports to inform the setting of the small-scale technology percentage.

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