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2018 Annual statement

Progress towards the 2020 target

In 2018 it became certain that the Large-scale Renewable Energy Target of 33,000 gigawatt hours will be achieved in 2020.2

Overall findings

At the end of 2018, enough utility-scale renewables capacity was commissioned and generating, or under construction, to meet the Large-scale Renewable Energy Target in 2020.

The portion of household electricity bills attributable to the Large-scale Renewable Energy Target was $9.85 per quarter for the average household electricity bill in 2018.3

The Large-scale generation certificate spot price moderated significantly towards the end of the year from around $85.00 in January to $47.50 in December 2018 and fell further to $31.00 by mid-March 2019. This will moderate the costs to electricity retailers and should be reflected in the pass through cost to electricity bills in 2019.


A record 3455 megawatts of constructed projects were accredited in 2018, more than triple the 1113 megawatts accredited in 2017, the previous record.

In 2017, the Clean Energy Regulator stated that 6400 megawatts would need to be commissioned between 2017 and 2019 to meet the target in 2020. This capacity will be accredited and generating ahead of schedule, around mid-2019.

Since 1 January 2016, 11,611 megawatts of new capacity has been firmly announced. Of this, 4474 megawatts has been commissioned4 against the 6400 megawatts required to meet the 2020 target. A further 5408 megawatts is under construction and an additional 1729 megawatts of projects hold a power purchase agreement. We would expect these projects to reach financial close and start construction in 2019.

This is due to the higher level of Large-scale renewable energy capacity build by the industry in the three years from 2017 to 2019 than the first 16 years of the scheme.

Certificate prices

Large-scale generation certificate spot prices stayed around the $85.00 mark for most of 2018 before rapidly falling to around $47.50 in December 2018 and further to $31.00 by mid-March 2019.

This fall was likely due to a combination of the market recognising the 2020 target will be materially exceeded and our updated stance on deferral of certificate liability. This position was articulated clearly in our market update published in October 2018.5

Once it was clear the 2020 target will be exceeded, the Clean Energy Regulator communicated to the market that we had no objections to the use of shortfall in the expectation that liable entities would true up these positions with Large-scale generation certificates in a subsequent year, as allowed for under the law.

The take up of this option by industry has likely shifted demand for certificates beyond 2020. It also brought forward and smoothed the expected fall in Large-scale generation certificate prices. This will likely reduce the impact of the Large-scale Renewable Energy Target on electricity prices in 2019 and beyond.

As a result, a healthy 7.1 million surplus of certificates remained available in the market following the annual surrender of certificates in February 2019, down from 9.4 million the previous year.

Considering lower forward contract prices, and the large increase in supply expected in 2019, the Clean Energy Regulator expects further declines in the spot certificate price in 2019.


On-time surrender of Large-scale generation certificates reduced to 86.1 per cent from 93.3 per cent in 2017 as more liable entities chose to utilise shortfall provisions. As certificate prices are falling, there will be a commercial incentive for liable entities who paid shortfall charges in 2018 or earlier to purchase certificates and redeem the shortfall charge within the allowable three-year period.

Household electricity prices

According to the Australian Energy Market Commission, the Large-scale Renewable Energy Target accounted for an estimated 2.9 per cent (or an average $9.85 per quarter) of the average household electricity bill in 2018. The Clean Energy Regulator expects the certificate spot price to continue to moderate as liquidity improves; and this should further reduce the pass through cost to electricity bills in 2019 and beyond.

Looking forward

The Clean Energy Regulator expects approximately 4000 megawatts of Large-scale capacity will be accredited in 2019, taking the total to around 8400 megawatts generating since 2017.

With the capacity of new build commencing generation in 2018 combined with the expected accreditations in 2019 and 2020, we expect generation to step up from around 22,000 gigawatt hours in 2018 to around 30,000 gigawatt hours in 2019 and 40,000 gigawatt hours in 2020.6

This additional renewable energy generation will deliver large reductions in greenhouse gas emissions from the electricity sector. Quarterly electricity emissions have already fallen from 53.2 Mt CO 2-e in September 2008 to 44.1 Mt CO2-e at end September 2018. This trend is shown in Figure 1.7

The current pipeline of projects that the Clean Energy Regulator is tracking suggests that we could see similar levels of capacity commissioned in 2020 and 2021 as we expect in 2019, though with less certainty.

Beyond that, the extent of the likely build is necessarily more uncertain, however, we can make observations on the factors currently at play.

The strong momentum in new firm project announcements continued in 2018 and early 2019 well beyond the point where it was clear the 2020 target would be met. Hence, it is likely that during 2018 the key driver of new announcements shifted from Renewable Energy Target incentive to commercial factors and state procurement processes.

There is evidence of an increasing number of power purchase agreements from both retailers and corporates for commercial reasons.8 The record level of new construction over the past two years, combined with ongoing technology cost reductions, contributed to reported costs required for new renewables projects declining materially on a per megawatt hour basis.

There is also greater diversification in the finance models of new project developers, with some international participants not needing to raise debt finance in Australia.

In relation to potential ‘headwinds’, there has been much public discussion on grid and connection constraints in a number of areas as well as changing Marginal Loss Factors9 impacting a number of projects as more power stations become connected in constrained parts of the grid.

Although it is clear the 2020 target will be exceeded, we will continue to track and publish the investment pipeline of firm projects to support policy considerations and planning by electricity market bodies to manage the transition. General market feedback is that the data is valued.

Figure 1: Quarterly electricity emissions and National Electricity Market emissions intensity
Figure 1: Quarterly electricity emissions and National Electricity Market emissions intensity
QuarterTotal electricity sector emissions (measured in million tonnes of carbon dioxide equivalent)National Electricity Market emissions intensity (measured in million tonnes of carbon dioxide equivalent)
September 200853.2
December 200853.7
March 200952.0
June 200952.1
September 200951.0
December 200951.6
March 201051.4
June 201050.4
September 201049.4
December 201048.50.90
March 201149.8
June 201149.6
September 201150.4
December 201150.70.96
March 201250.0
June 201248.8
September 201246.2
December 201247.00.90
March 201346.3
June 201347.0
September 201345.6
December 201345.00.87
March 201446.0
June 201445.7
September 201447.0
December 201447.20.92
March 201547.0
June 201547.1
September 201548.2
December 201548.50.92
March 201648.5
June 201648.6
September 201648.1
December 201646.1
March 201747.8
June 201746.1
September 201745.2
December 201745.00.84
March 201845.1
June 201845.4
September 201844.10.77

  1. This statement is made in compliance with the requirement for the Clean Energy Regulator to make an annual statement to the Parliament on how the scheme is tracking towards the 2020 target, and any impact the Large‑scale Renewable Energy Target is having on electricity prices.
  2. Methodology taken from the Australian Energy Market Commission, 2018 Residential Electricity Price Trends Methodology Report, December 2018, available at:
  3. This figure is slightly lower than 2017-2018 capacity. It does not include projects that were already committed in 2015 and adjustments to exclude non-renewable capacity.
  4. Clean Energy Regulator, Large-scale generation certificate market update – October 2018, available at:
  5. It is not possible to forecast this with precision as a number of factors can affect this such as the year to year variability in hydro generation and potential curtailment of wind and solar at times.
  6. Australian Energy Market Operator, Quarterly Energy Dynamics - Q4 2018, February 2019, p.14 available at: https://www.aemo. and Department of Environment and Energy, Quarterly Update of Australia’s National Greenhouse Gas Inventory: September 2018, p.9 available at: http://www.environment. gas-inventory-sept-2018.
  7. ESCO Pacific, BlueScope Steel Signs Largest Corporate Solar Offtake in Australia, July 2018 available at:
  8. Australian Energy Market Operator, Draft Marginal Loss Factors for the 2019-20 Financial Year, March 2019 p.28-33 available at:‑boundaries.

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