liable entities (generally electricity retailers) are required to surrender approximately 32.6 million large-scale generation certificates (LGCs) to meet their Large-scale Renewable Energy Target (LRET) obligations for 2022.
Liable entities that do not surrender sufficient LGCs to meet their obligations are required to pay a
non-tax deductible shortfall charge, with a refund available in certain circumstances.
The LRET aims to incentivise the development of renewable energy power stations by meeting the annual target for renewable electricity set out in the
Renewable Energy (Electricity) Act 2000 (the Act). The annual target increased each year until 2020 and is now constant at 33,000,000 megawatt hours (MWh) to 2030.
The number of LGCs each liable entity is required to surrender each year is calculated by multiplying the amount of wholesale electricity (relevant acquisitions) they acquire (minus exemptions) by the RPP for that compliance year. Liable entities surrender LGCs annually to the agency to meet their Renewable Energy Target obligations.
Quarterly Carbon Market Report provides regular information on the markets the agency administers, including LGC creation trends.
Each year, the agency recommends a percentage to the Assistant Minister for Industry, Energy and Emissions Reduction (the Assistant Minister) using data or estimates for the matters the Assistant Minister must consider, as set out in the Act. These matters are:
The Assistant Minister may also consider other matters when determining the RPP. The RPP must be set by regulation by 31 March of the setting year, otherwise a default percentage is applied.
The Act sets out the amount of renewable electricity required for each year. The 2022 target is 33,000,000 MWh.
Relevant acquisitions of electricity are wholesale electricity purchases by a liable entity, as defined in the Act. Relevant acquisitions of electricity are estimated based on the sum of acquisitions reported by liable entities in the
REC Registry 2 years prior to the setting year, rounded to the nearest 100,000 MWh.
Data 2 years prior is used because compliance and assessment activities for that year have been completed and the number is unlikely to change. This process assumes electricity demand remains relatively stable, in line with the
Australian Energy Market Operator’s predictions.
Estimated relevant acquisitions of electricity for 2020 used in the 2022 RPP calculation, are 211,400,000 MWh.
The cumulative adjustment equals the sum of all annual targets from 2001 to 2021 minus the sum of all liable entity liabilities (in MWh) for the same period. It ensures liable entities are required to surrender only the number of LGCs needed to meet the legislated renewable energy targets.
Using liability and not the number of surrendered LGCs ensures; a liable entity’s obligation isn’t affected by another entity not meeting its obligation; and voluntarily surrendered LGCs don’t affect liable entities’ obligations.
For the 2022 RPP the cumulative adjustment is -381,109 MWh. This is a negative number, which means liable entity obligations are below annual targets by this amount.
Businesses receive exemption certificates (in MWh) for electricity used in
emissions-intensive trade-exposed (EITE) activities. Businesses exchange these certificates with their electricity retailer to reduce electricity costs. The electricity retailer surrenders exemption certificates to the agency to reduce their RET liability.
Each year we estimate the EITE exemptions and deduct this amount from the acquired electricity estimate for that year. Like relevant acquisitions, data 2 years prior to the setting year are used because compliance and assessment activities for that year have been completed and the number is unlikely to change.
Estimated EITE exemptions for 2020, used in the 2022 STP calculation, are 36,390,000 MWh.
The matters the Assistant Minister must consider when setting the RPP are be expressed by the formula:
In 2022 RPP calculation is:
If the RPP is not set by 31 March in the setting year, a default value automatically comes into force. To date the default RPP has not been applied.
The following link is for a data set that includes RPPs and changes to LRET targets.
documentAsset:LRET 2001-2030 Annual targets and renewable power percentages
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