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ERM falls short of their renewable energy obligations

24 January 2017

ERM Power have today announced that they will pay $123 million in shortfall charges rather than meet their full obligation to surrender large-scale generation certificates under the Renewable Energy Target. ERM have decided to do this for tax reasons despite there being sufficient certificates available to cover the renewable energy obligations of all liable entities.

The Clean Energy Regulator will fully investigate this matter and ensure that ERM Power is held to account for their obligations. We note ERM Power acknowledges that they have an opportunity to remediate the shortfall by purchasing and surrendering certificates for 2016 within a three year window. Given ERM Power’s stated support for the principles of the scheme, we urge them to take steps to rectify their position and ensure they do not fall further behind in future years.

The objectives of the Renewable Energy Target are to increase Australia’s generation of electricity from clean sources, and reduce Australia’s carbon emissions.

Under the Renewable Energy (Electricity) Act 2000 (the Act) each electricity retailer meets their obligations under the Renewable Energy Target by surrendering large-scale generation certificates to the Clean Energy Regulator in proportion to their share of the electricity market. Retailers acquire these large-scale generation certificates from renewable energy power generators such as wind or solar farms. A shortfall charge is imposed on those who fail to surrender sufficient certificates.

To date, the vast majority of liable entities have complied with the objectives of the Act and fulfilled their obligations to surrender certificates. Compliance rates have been running at more than 99%.

“We view the intentional failure to surrender certificates as a failure to comply with the spirit of the law and an undermining of the objectives of the scheme. Prices charged to customers include a component to pay for additional renewable energy generation. We believe many customers would be disappointed to know that this money has not been used for the intended purpose,” Clean Energy Regulator Chair Chloe Munro said.

“On the whole, the energy sector takes a responsible approach to meeting their obligations under the Renewable Energy Target. We’ve been impressed to see a pick up in the rate of new renewable projects supported by large retailers announced in the past few months,” Ms Munro said.

“It’s hugely disappointing that a major company has deliberately chosen to pay a large shortfall charge. It’s our view that an investment in a growing industry is money better spent than a financial penalty that has no return.”

About the Renewable Energy Target

The Renewable Energy Target is an Australian Government scheme designed to encourage the additional generation of electricity from sustainable and renewable sources and reduce emissions of greenhouse gases in the electricity sector.

The Renewable Energy Target works by allowing both large-scale power stations and the owners of small-scale systems to create certificates for every megawatt hour of power they generate. Certificates are then purchased by electricity retailers who sell the electricity to householders and businesses. These electricity retailers also have legal obligations under the Renewable Energy Target to surrender certificates to the Clean Energy Regulator, in percentages set by regulation each year. This creates a market which provides financial incentives to both large-scale renewable energy power stations and the owners of small-scale renewable energy systems.

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