source: Clean Energy Regulator
STP Percentage - STC Target
This means liable entities (generally electricity retailers) are required to surrender approximately 37.5 million small-scale technology certificates (STCs) to meet their Small-scale Renewable Energy Scheme (SRES) obligations for 2019.
This figure is derived by adding 7.9 million STCs to the estimated 29.6 million supply of STCs in 2019 (see below for how this is determined). The 7.9 million STC adjustment is the difference between previous years’ STC creations and the actual number of STCs surrendered in those years.
Liable entities that do not surrender sufficient STCs to meet their obligations are required to pay a non-tax deductible shortfall charge.
About the small-scale technology percentage
The SRES aims to balance supply and demand by requiring all STCs that are created to be surrendered over time. To do this the STP is set each year to require liable entities to surrender to the agency the same number of STCs as the number that are estimated to be created in that year, plus or minus an adjustment for previous under- or over-surrender.
Under the SRES, liable entities surrender STCs quarterly to the agency to meet their Renewable Energy Target obligations.
The number of STCs each liable entity is required to source and surrender each year is calculated by multiplying the amount of electricity acquired in megawatt hours (minus any exemption certificates) by the STP for that compliance year.
Each year the STP must be set by regulation by 31 March of that year, otherwise a default percentage is applied.
Setting the small-scale technology percentage
To set the STP each year, we recommend a percentage to the Minister for Energy (the Minister) using a combination of actual data and estimates for the matters that must be considered, including the:
- estimated number of STCs to be created for the year
- estimated amount of electricity that will be acquired under relevant acquisitions for the year
- difference between the number of STCs created for all previous years and the number surrendered in those years, and
- estimated amount of electricity to be claimed as exemptions for the year.
The Minister may also take into account other matters in determining the STP.
a. Estimated number of STCs to be created for the year
The estimated number of STCs to be created in the setting year is derived from forecasts of creation numbers provided by qualified consultants engaged by the agency. In 2019, the average of the consultants’ estimates that the agency accepted was 29.6 million STCs. See the consultants’ STP modelling reports.
It is important to note that these estimates are made in early January and are based on data to 31 December the previous year. They do not reflect any trends in STC creation over the first quarter of the setting year.
b. Estimated amount of electricity to be acquired
The amount of electricity to be acquired is based on the reported relevant acquisition data from the most recent year available in the REC Registry at the time the percentages are calculated in January of the setting year. This is data from two years prior to the setting year, i.e. in setting the 2019 STP, relevant acquisitions data for 2017 is used. This dataset incorporates subsequent changes in the amounts initially reported by liable entities to address errors or resolution of a disputed amount.
This process assumes electricity demand remains relatively stable. As the Australian Energy Market Operator predicts electricity demand will be flat in the short to medium term, this approach is considered robust. If electricity demand changes significantly, an update to the market will be provided prior to commencement of the setting year.
The estimated relevant acquisition of electricity used in setting the 2019 STP is 211,500 gigawatt hours (GWh).
The reported total relevant acquisitions for 2017, as at January 2019, are 211,480 GWh. This amount is subject to change as adjustments are made as a result of compliance and assessment activities.
c. Difference between previous creation estimates and surrenders
Each year the difference between the sum of STCs created in previous years and the sum of STCs surrendered in those years is calculated and used to adjust for disparities between the estimates made in previous years and the actual amounts. This cumulative adjustment aims to account for over- or under- supply of STCs in earlier years and aligns with the aim that all STCs are surrendered over time.
Differences arise due to the estimates for the STC creation number, relevant acquisitions and exemptions for earlier years varying from later verified amounts. There may also be changes in the amount of liability reported by liable entities, e.g. because of error or resolution of a disputed amount.
Other factors included in the annual adjustment amount are the:
- 660,000 STCs that were converted to LGCs when the Renewable Energy Target split into the separate large and small-scale schemes, and
- cumulative total of STCs that have been voluntarily surrendered, for altruistic reasons or to maintain compliance with the SRES. For the 2019 STP this amounted to 174,000 STCs.
For the 2019 STP the cumulative adjustment was to add 7,866,219 STCs.
d. Estimated exemptions
Businesses that undertake Emissions-Intensive Trade-Exposed (EITE) activities receive exemption certificates (in MWh) for the electricity used in undertaking the EITE activity. Business exchanges these certificates with their electricity retailer for reduced electricity costs. Ultimately the certificates are surrendered to us by the electricity retailer to reduce their liability.
Each year we estimate the amount of exemption that applies to EITE activities and this amount is deducted from the liability estimate for that year.
In 2019 the estimated exemption amount is 39,100 GWh.
Calculating the small-scale technology percentage
The matters the Minister must consider above can be expressed by the formula:
It is open to the Minister to also consider other matters in determining the STP. In 2019 no other matters were considered.
2019 small-scale technology percentage
In 2019 the calculation of the STP was based on the following actual amounts or estimates:
Factors affecting the setting of the 2019 STP
By the end of 2018, 7.9 million more STCs had been created than liable entities were required to surrender. Consequently, this amount was added to the amount of STCs estimated to be created in setting the 2019 STP.
The over-supply of STCs in 2018 was primarily due to a substantial boom in the installed capacity of solar photovoltaic (PV) systems which lead to a surge in STC creation. The estimate used in setting the 2018 STP of 22.1 million STCs was significantly below the actual creation amount for the year of 28.7 million.
Default small-scale technology percentage
If the STP is not set by 31 March in the setting year, a default value automatically comes into force. This must be calculated using the formula:
The default value is calculated as at 31 March if it were to be applied. To date, a default STP has not been applied.
Non-binding small-scale technology percentage
Publishing of non-binding estimates for the STP for the next two years is a legislative requirement. The aim of the non-binding STPs is to provide a broad indication of what the STP could be in future years. The consultant’s STC creation estimates are used to determine the non-binding STP for 2020 and 2021 and are based on data to 31 December 2018.
As these estimates are provided in January, they cannot take into account trends observed in the market for the first quarter of the setting year. Additionally data on the over or under-supply of certificates in the year before the non-binding estimate year is also not available. The non-binding estimates should therefore be considered a general guide only.
The agency publishes STC market updates which provide an indication of trends and the likely impact of any surplus or deficit for the year.
The non-binding STPs for the next two years do not in any way bind the Clean Energy Regulator or affect the determination of a liable entity’s liability in those years.
The non-binding STP estimates for the next two years are shown below.
|Estimated number of STCs for the year
Previous small-scale technology percentages
The following table provides information on the STP for each year and the non-binding percentages.
Data as at 2 January 2019.