Incentives for renewable generation under the Renewable Energy Target Amar Rathore - General Manager Remote Area Power Supply Conference, 17 to 18 March 2014

Overview

•  About the Renewable Energy Target (RET) •  The Large Scale Renewable Energy Target: supply and demand •  The Small-scale Renewable Energy Scheme: supply and demand •  The RET Review

About the Renewable Energy Target

Legislated objectives

•  To encourage additional generation of electricity from renewable sources

•  To reduce emissions of greenhouse gases in the electricity sector

•  To ensure that renewable energy sources are ecologically sustainable

About the Renewable Energy Target

•  Incentive for investment through creation and sale of renewable energy certificates –  One certificate represents one megawatt hour (MWh) –  Large-scale Renewable Energy Target (LRET): large-scale

generation certificates (LGCs) –  Small-scale Renewable Energy Scheme (SRES): small-scale

technology certificates (STCs) •  Liable entities (mostly electricity retailers) purchase certificates

The scheme is designed to generate an additional 41,000 gigawatt hours of electricity from renewable energy sources by 2020.

Renewable Energy Target market mechanism

What is the REC Registry?

•  Facilitates the creation, registration, auditing, transfer and surrender of large-scale generation certificates and small-scale technology certificates

Renewable Energy Target market mechanism: supply

Renewable energy power stations

•  Accredited power stations may create large-scale generation certificates (LGCs) for additional renewable energy generation above the baseline. –  One LGC equals one megawatt hour

•  To apply for accreditation under the Large-scale Renewable Energy Target a power station must: –  generate some or all electricity from an eligible renewable

energy source –  meet requirements as specified by the Act, such as operate in

accordance with Commonwealth, state and local government planning/approval requirements

Eligible renewable energy sources

1.  Hydro 2.  Wave

3.  Tide 4.  Ocean

5.  Wind 6.  Solar

7.  Geothermal-aquifer

8.  Hot dry rock 9.  Energy crops

10.  Wood waste 11.  Agricultural waste

12.  Waste from agricultural products

13.  Food waste 14.  Food processing waste

15.  Bagasse

16.  Black liquor 17.  Biomass-based components of municipal

solid waste 18.  Landfill gas 19.  Sewage gas and biomass-based

components of sewage 20.  Waste coal mine gas

Accredited renewable energy power stations

Renewable energy source ACT NSW NT Qld SA Tas Vic WA Total Agriculture, food and agriculture waste 0 6 1 2 0 1 2 2 14

Bagasse co‑generation, energy crops 0 3 0 23 0 0 0 1 27

Black liquor 0 1 0 0 0 0 1 0 2

Hydro 1 31 - 10 1 34 21 3 101

Landfill Gas 2 16 1 14 4 3 13 9 62

Sewage gas and biomass‑based 0 9 0 4 0 1 4 1 19

Solar 4 16 13 11 5 1 8 10 68 Waste coal mine 0 4 0 3 0 0 0 0 7 Wind 0 9 1 3 17 9 18 21 78 Wood waste 0 6 0 4 1 1 3 1 16

Total(1) 7 101 16 74 28 50 70 48 394

Data accurate at 31 December 2013 (1) Certain power stations are accredited for multiple fuel sources

Additional renewable energy generation under LRET

*Actual generation from biomass is small relative to capacity as many of these accredited power stations do not operate at a high capacity. (Sugar Industry) LGCs shown in the graph include LGCs generated from sugar mill fuel sources such as bagasse, bagasse co-generation, biomass-based components of municipal solid waste energy crops, wood waste and black liquor. LGCs shown in the above chart are generated from eligible/ renewable sources above the relevant electricity power baseline.

Large-scale renewable energy investment

End 2011 End 2012 End 2013

Total estimated investment in renewable power stations *

$10.5 billion $10.6 billion $14.3 billon

Number of accredited power stations

335 368 394

Estimated generation capability of accredited power stations

13,500 GWh per year

16,200 GWh per year

17,300 GWh per year

Equivalent supply of electricity

2.0 million households

2.5 million households

2.7 million households

*estimated based on data provided to the Clean Energy Regulator ^ Based on average household electricity use of 6.57 megawatt hours per year (Source: ABS)

Renewable Energy Target market mechanism: demand

Large-scale Renewable Energy Target Demand Year Target (GWh) Renewable power

percentage (RPP) 2001 300 0.24% 2002 1,100 0.62% 2003 1,800 0.88% 2004 2,600 1.25% 2005 3,400 1.64% 2006 4,500 2.17% 2007 5,600 2.70% 2008 6,800 3.14% 2009 8,100 3.64% 2010 12,500 5.98% 2011 10,400 5.62% 2012 16,673 9.15% 2013 19,088 10.65% 2014 16,950 9.87%

Acquitting annual liability: large-scale generation certificates

•  The amount of liable electricity acquired (MWh) is multiplied by the renewable power percentage

•  This calculates the number of LGCs a liable entity must purchase and surrender

•  A $65 shortfall fee per LGC applies if a liable entity fails to surrender the required amount of LGCs

Partial exemption certificates (PECs)

•  Partial exemption certificates are provided in relation to liable electricity consumed for an emissions-intensive trade-exposed (EITE) activity.

•  The level of partial exemption is based on the industry-average electricity intensity.

•  The EITE activities which have received the most partial exemption for 2013 are: 1. Aluminium smelting 2. Petroleum refining 3. Smelting zinc

Renewable Energy Target market mechanism: supply

Small-scale system eligibility

The system must: •  a small generation unit must have a capacity of no more than 100

kilowatts for solar PV, 10 kilowatts for wind and 6.4 kilowatts for hydro. Larger systems must apply for accreditation as power stations solar water heater or air source heat pump systems must be listed on the Register of solar water heaters to be eligible for STCs

•  be installed by a CEC accredited installer, in accordance with local, state and federal installation requirements and guidelines, including safety.

•  have STCs created within 12 months of the installation date.

Small-scale system deeming

Deeming •  The amount of STCs a system may be eligible for is based on its

deemed amount of renewable energy generates or displaces over the course of its lifetime – this is up to 15 years for small generation units and up to 10 years for solar water heaters

•  The system’s kilowatt capacity and geographic location (postcode) is used to calculate the deemed amount of electricity generated or displaced by small generation units and solar water heaters respectively

Small-scale system installations Installation quantity

Rated output (kW)

Solar photovoltaic (PV) panels 1,189,902 3,218,286

Wind 380 1,362

Hydro 15 22

Air source heat pumps 174,532 n/a

Solar water heaters 675,096 n/a

Total 2,039,925 3,161,202

Data correct as at 1 March 2014 Note: These numbers will increase as certificates can be created up to 12 months after the date the system was installed.

Renewable Energy Target market mechanism: demand

Small Technology Percentage: demand

Year  

The estimated number of STCs

created (A)  

Number of STCs estimated above the previous target

(B)  

SRES target Equals (A) + (B)  

Small-scale technology percentage  

2014   16,708,470   + 1,948,868   18,657,338   10.48%  

2013   20,700,000   + 15,000,000   35,700,000   19.70%  

2012   22,306,000   + 22,480,000   44,786,000   23.96%  

2011   28,000,000   N/A   28,000,000   14.80%  

Acquitting liability: small-scale technology certificates

•  The amount of liable electricity acquired (megawatt hours) is multiplied by the small-scale technology percentage

•  This calculates the number of STCs a liable entity must purchase and surrender each quarter (28 April, 28 July, 28 October and 14 February)

•  A $65 shortfall fee per STC applies if a liable entity fails to surrender the required amount of LGCs

•  Liable Entities that do not surrender the required amount of STCs, must pay a small-scale technology shortfall charge of $65 for each STC not surrendered

RET Review

•  The Australian Government announced the review of the Renewable Energy Target scheme by an expert panel on 17 February 2014.

•  The panel will undertake public consultations and seek submissions before reporting to Government by mid-2014.

•  Until the 2014 review is complete and any consequent legislative amendments are in place we will continue to administer the Renewable Energy (Electricity) Act 2000 and other associated legislation.

•  More information about the 2014 RET Review, including the Terms of Reference can be found on the Department of the Prime Minister and Cabinet website www.retreview.dpmc.gov.au.

•  394 renewable energy power stations are accredited under the Renewable Energy Target, with an estimated generating capacity is over 17,300 gigawatt hours each year

•  More than two million small-scale systems have been installed under the scheme

•  Liable entities are highly compliant with over 99.5% compliance through certificate surrender rather than shortfall charge

What the Renewable Energy Target has achieved

Questions