Increase in validated renewable energy certificates

Accredited large-scale renewable energy power stations can create large-scale generation certificates for each megawatt hour of renewable source electricity they generate above their baseline (the existing generation of renewable source electricity in 1997).

Individuals and businesses who install eligible small-scale systems can create and trade small-scale technology certificates. In most cases, they assign the right to create their certificates to registered agents in return for a discount on the installation of the system.

We assess claims for certificates to confirm they represent the correct amount of eligible renewable energy generation. Once validated, certificates can be registered and traded in the market.

This year there was an increase in the number of large-scale generation certificates we validated, from 17,320,821 in 2016 to 19,075,335 in 2017. This reflects the upswing in the number and capacity of power stations accredited in 2016 that went on to create certificates in 2017. It is also partly due to hydro power stations having large numbers of certificates validated.

Wind was again the most dominant fuel source in large-scale generation certificate validations, as shown in Figure 3.

For information on the large-scale generation certificate price, see Progress towards 2020.

Source	Validated large-scale generation certificates
Biomass	2 295 261
Hydro	3 305 495
Solar	719 556
Wind	11 926 885
Waste coal mine gas	828 138
Total	19 075 335

There was also an increase in the number of small-scale technology certificates validated, up34 per cent from 16,111,973 in 2016 to 21,662,973 in 2017, with 91 per cent of these for solar panel systems as shown in Figure 4.

Source	Validated small-scale technology certificates
Solar	19 740 485
Wind	217
Hydro	184
Air source heat pump	543 160
Solar water heater	1 378 927
Total	21 662 973

Renewable Energy Target liability

A healthy surplus of large-scale generation certificates remains in the Large-scale Renewable Energy Targetmarket following final surrender by liable entities for the2017 assessment year. The surplus should remain healthy and support liquidity in the market as supply from new projects is delivered in 2018.

Across both the Large-scale Renewable Energy Target and Small-scale Renewable Energy Scheme, 95.5 per cent of certificates were surrendered on time by liable entities, up from 93.8 per cent for the 2016 assessment year.

Under the Large-scale Renewable Energy Target, entitiesthat do not surrender at least 90 per cent of their liabilityare required to pay a $65 shortfall charge for eachcertificate not surrendered.

In 2017, the on time surrender rate for large-scale generation certificates was 93.3 per cent, up from 89.3 per cent lastyear and the amount of shortfall charges substantially decreased, from $143 million last year to $89.5 million.

A full list of large-scale generation certificate shortfallof more than 10 per cent is at Appendix C.

Voluntary surrender

Some organisations surrender renewable energy certificates for reasons not related to liability under the Renewable Energy Target—this is known as voluntary surrender. Most certificates voluntarily surrendered are through the state and territory accredited program, GreenPower.In addition, some desalination plants surrender certificates in accordance with their state-based approvals.

Liability exemptions

The Renewable Energy (Electricity) Act 2000 allows for liability exemptions for emissions-intensive trade-exposed activities. Companies eligible for an exemption are issued with exemption certificates, which are provided to their electricity retailer. The electricity retailer then uses these exemption certificates to reduce their reported electricity acquisitions under the Renewable Energy Target.

In 2017 we finished streamlining the exemption certificate application process, resulting in applications being processed several months earlier than in previous years.

In a significant deregulation outcome for industry, we worked with the Department of the Environment and Energy to streamline the method used to calculate exemptions, based onelectricity used by emissions-intensive trade-exposed activities rather than weighted industryaverage electricity used and the previous financial year's production. The process to amend the regulations was completed in December 2017.

As shown in Figure 5, in 2017 the most exemption certificates were issued to aluminium smelting activities, consistent with previous years.

Emission intensive trade exposed activities	MWh	Percentage
Aluminium smelting	24 900 585	61.91%
Smelting zinc	1 915 639	4.76%
Manufacture of newsprint	1 318 336	3.28%
Packaging and industrial paper manufacturing	1 117 782	2.78%
Aluminium refining	1 109 618	2.76%
Range of other 40 activities	9 861 148	24.52%
Total	40 223 108	100.00%

Setting demand

Under the Renewable Energy Target, liable entities must surrender a number of large-scale generation certificates and small-scale technology certificates each year. The number is determined by applying the renewable power percentage for large-scale generation certificates and the small-scale technology percentage for small-scale technology certificates to an entity's electricity acquisitions, minus exemptions, for that year. Entities acquit their liability by surrendering the required number of certificates to us—quarterly for small-scale technology certificates and annually for large-scale generation certificates.

The renewable power percentage for 2017 was 14.22 per cent.

The renewable power percentage takes into account:

• the legislated annual target (renewable electricity required for the year)
• certificates surrendered under or over the previous year’s target
• the estimated amount of electricity that liable entities will acquire that year, and
• the estimated exemption in that year for emissions-intensive trade-exposed activities.

The small-scale technology percentage was 7.01 per cent.

The small-scale technology percentage is calculated based on the:

• estimated value (in megawatt hours) of small-scale technology certificates that will be created for the year
• certificates surrendered that were under or over the previous year target
• accumulated excess or shortfall from previous years
• estimated amount of electricity that will be acquired by liable entities for the year, and
• estimated exemption for that year for emissions-intensive trade-exposed activities.