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Annual statement

Owing to the significant progress made during 2017, the 2020 Large-scale Renewable Energy Target is on track to be achieved.

Overall findings

The momentum in new project announcements observed in late 2016 continued throughout 2017 with enough capacity now firmly announced to meet the Large-scale Renewable Energy Target of 33,000 gigawatt hours by 2020.

The portion of household electricity bills attributable to the Large-scale Renewable Energy Target was $8.13 per quarter for the average household electricity bill in 2017. Australian Energy Market Commission modelling also showed additional renewable energy in the market will reduce electricity costs over the next three years.

We expect the large-scale generation certificate spot price to moderate as new capacity comes on line.


In the 2016 annual statement, we said 6000 megawatts was needed for the target to be met.2 Our estimate of the required capacity has increased to 6400 megawatts3 due to the surge in solar, which has a lower capacity factor4 than wind. Hence, more capacity is required to achieve the same amount of electricity generation.

Nevertheless, by the end of 2017, 6535 megawatts of projects had been firmly announced which is sufficient to meet the target.

New capacity of 4927 megawatts had either been accredited or was under construction, and a further 1608 megawatts had a power purchase agreement and was expected to reach financial close and begin construction in 2018.

As the strong momentum has continued into early 2018, we believe more than the required build to meet the target will be under construction well before the end of 2018. This is ahead of schedule to the timing we initially said was needed to meet the target. A record 1088 megawatts of constructed projects were accredited and generating in 2017, more than double the capacity in 2016. Our expectation is that accredited capacity will more than double again in 2018. We continuously update the pipeline of project announcements on our website and provide regular updates to the market.5

As project commitments largely started in late 2016, certificate liquidity may remain relatively tight in 2018 and 2019. However, in our view, about five million certificates will still remain after the annual surrender date in each year. Hence, exceeding the capacity required to meet the target will improve certificate liquidity and provide the best prospects for redeeming shortfall charges within the allowable three-year period.

Certificate prices

Large-scale generation certificate spot prices moved within the $76 to $89 range in 2017 and experienced some periods of volatility. The price was $85.25 at the end of 2017.

In 2017, 19.1 million large-scale generation certificates were validated and we expect this will increase to about 24 million in 2018 and likely around 32 to 34 million in 2019.

Following the annual surrender of certificates in February 2018, 9.4 million large-scale generation certificates remained available in the market, down from 13.4 million the previous year.

Demand in the Large-scale Renewable Energy Target remains the same from 2020 to 2030, so supply is expected to materially exceed demand at some stage, leading to lower large-scale generation certificate spot prices. The expectation of price declines over time are reinforced by the forward contract price curve and published power purchase agreement prices that remain far lower than the current spot price.


On time surrender of large-scale generation certificates improved to 93 per cent, up from 89 per cent the previous year. For the first time we saw some liable entities use the legislative allowance to carry forward less than 10 per cent of liability to the following year without paying the shortfall charge.
Most entities have this option available to them and this will assist certificate liquidity over the next two years.

Household electricity prices

According to the Australian Energy Market Commission, the Large-scale Renewable Energy Target accounted for an estimated 2.4 per cent (or an average $8.13 per quarter) of the average household electricity bill in 2017. We estimate that there has been approximately a 12 per cent increase on previous years.

This is a result of large-scale generation certificate spot prices largely staying the same but the numbers of certificates required to meet the target increasing. However, it should be noted the additional renewable energy entering the market under the Renewable Energy Target is likely to reduce wholesale electricity costs in the National Energy Market in 2018–19 and 2019–20.6

Looking forward

A key feature of 2017 was that enough large-scale build was firmly announced to reach the Large-scale Renewable Energy Target. We expect 2018 and 2019 will see significant construction and the first generation from large-scale capacity.

Our expectation is about 2600 megawatts of large-scale capacity will be accredited in 2018 and at least another 2700 megawatts in 2019.7

We will continue to monitor and publish project announcements including those expected as a result of state processes that leverage the Large-scale Renewable Energy Target.8


  1. At this time, we estimated wind would make up 75 per cent of the pipeline and solar 25 per cent.
  2. The current pipeline of projects is 54 per cent wind and 46 per cent solar.
  3. See Glossary for further detail.
  4. For more details, see
  5. Source: Australian Energy Market Commission 2017 Residential Electricity Price Trends
  6. Projects announced in first quarter of 2018 will be accredited in 2019, so this number will increase based on future announcements.
  7. Source: Victorian Renewable Energy Auction Scheme and Queensland Renewables 400.

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