Legislated demand

The combined surrender rate for both large and small-scale schemes was 89 per cent, down five per cent on the surrender rate of 93.3 per cent for the 2018 assessment year. The reduction in surrender rate is mostly a result of increased paid shortfall in the Large-scale Renewable Energy Target, which had a surrender rate of 76.6 per cent with 7.7 million large-scale generation certificates taken as shortfall.

The actual Large-scale Renewable Energy Target liability required to be acquitted for the 2019 assessment year was 2.1 million certificates above the expected level of 31.2 million large-scale generation certificates. This was due to higher actual liable electricity demand (up two per cent) and lower emissions-intensive trade-exposed exemption (down three per cent) from when the renewable power percentage was set in March 2019. This will result in downward adjustments in setting the 2021 renewable power percentage.

Some liable entities also surrendered additional large-scale generation certificates in 2019 to claim a refund on shortfall charges paid for the 2016 assessment year. 2.3 million large-scale generation certificates were surrendered to redeem a refund of approximately $143 million. There is now $713 million in consolidated revenue from shortfall charges paid for the 2017, 2018 and 2019 assessment years. Of this, $412 million relates to the payment of shortfall charges for 3.4 million large-scale generation certificates for the 2019 assessment year.

The Renewable Energy (Electricity) Act 2000 allows exemptions from Renewable Energy Target liability for companies conducting eligible emissions-intensive trade-exposed activities. Companies eligible for exemption are issued with an exemption certificate. For the new electricity use method, the certificate details how to determine the amount of exemption in megawatt hours. The old production calculation method provides the exemption amount in the issued certificate.

Emissions-intensive trade-exposed entities agree to a commercial arrangement with their electricity retailer (a liable entity), who can then use the exemption certificate to reduce their obligation under the Renewable Energy Target.

The number of emissions-intensive trade-exposed entities increased from 93 in 2018 to 98 in 2019. The exemptions for 2019 represent 38,300 gigawatt hours of electricity that can be used to reduce electricity retailers’ relevant acquisitions. This is a two per cent reduction from the 39,100 gigawatt hours of exemption in 2018.