liable entities (generally electricity retailers) are required to surrender approximately 29.3 million small-scale technology certificates (STCs) to meet their Small-scale Renewable Energy Scheme (SRES) obligations for 2018.
This figure is derived by adding 7.2 million STCs to the estimated 22.1 million supply of STCs in 2018 (see below for how this is determined). The 7.2 million STC adjustment is the difference between previous years’ STC creations and the 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 deductible shortfall charge.
Previous years STPs can be viewed below.
The SRES aims to balance supply and demand by requiring all STCs that are created to be surrendered over time. To do this the STP is set each year to require
liable entities to surrender to the agency the same number of STCs as the number that are estimated to be created in that year, plus or minus an adjustment for previous under- or over-surrender.
Under the SRES, liable entities surrender STCs quarterly to the agency to meet their Renewable Energy Target obligations.
The number of STCs each liable entity is required to source and surrender each year is calculated by multiplying the amount of electricity acquired in megawatt hours (minus any exemption certificates) by the STP for that compliance year.
Each year the STP must be set by regulation by 31 March of that year, otherwise a default percentage is applied.
To set the STP 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 STP.
The estimated number of STCs to be created in the setting year is derived from forecasts of creation numbers provided by qualified consultants engaged by the agency. In 2018, the average of the consultants’ estimates that the agency accepted was 22.1 million STCs. See the consultants’
STP modelling reports.
It is important to note that these estimates are made in early January and are based on data to 31 December the previous year. They do not reflect any trends in STC creation over the first quarter of the setting year.
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 STP, 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 STP 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 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 in previous years and the actual amounts. This cumulative adjustment aims to account for over- or under- supply of STCs in earlier years and aligns with the aim that all STCs are surrendered over time.
Differences arise due to the estimates for the STC creation number, relevant acquisitions and exemptions for earlier years varying from later verified amounts. There may also be changes in the amount of liability reported by liable entities, e.g. because of error or resolution of a disputed amount.
Other factors included in the annual adjustment amount are the:
For the 2018 STP the cumulative adjustment was to add 7,197,525 STCs.
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 STP. In 2018 no other matters were considered.
In 2018 the calculation of the STP was based on the following actual amounts or estimates:
By the end of 2017, 7.2 million more STCs had been created than liable entities were required to surrender. Consequently, this amount was added to the amount of STCs estimated to be created in setting the 2018 STP.
The over-supply of STCs in 2017 was primarily due to a substantial boom in the installed capacity of solar photovoltaic (PV) systems which lead to a surge in STC creation. The estimate used in setting the 2017 STP of 15.1 million STCs was significantly below the actual creation amount for the year of 21.3 million. An over-estimate of relevant acquisitions in setting the 2017 STP was also a contributing factor.
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 is calculated as at 31 March if it were to be applied. To date, a default STP has not been applied.
Publishing of non-binding estimates for the STP for the next two years is a legislative requirement. The aim of the non-binding STPs is to provide a broad indication of what the STP could be in future years. The consultant’s STC creation estimates are used to determine the non-binding STP for 2019 and 2020 and are based on data to 31 December 2017.
As these estimates are provided in January, they cannot take into account trends observed in the market for the first quarter of the setting year. Additionally data on the over or under-supply of certificates in the year before the non-binding estimate year is also not available. The non-binding estimates should therefore be considered a general guide only. We note that recent rates of installation of small-scale systems are significantly higher than in these reports and this implies a higher non-binding STP for these years.
The agency publishes STC market updates which provide an indication of trends and the likely impact of any surplus or deficit for the year.
The non-binding STPs for the next two years do not in any way bind the Regulator or affect the determination of a liable entity’s liability in those years.
The non-binding STP estimates for the next two years are shown below.
The following table provides information on the STP for each year and the non-binding percentages.
Data as at 26 March 2018.
documentAsset:Small-scale technology percentage
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