source: Clean Energy Regulator

STP Percentage - STC Target

This means liable entities (generally electricity retailers) are required to surrender approximately 47.7 million small-scale technology certificates (STCs) to meet their Small-scale Renewable Energy Scheme (SRES) obligations for 2022.

Contents

• About the small-scale technology percentage
• Setting the small-scale technology percentage
• Calculating the small-scale technology percentage
• Non-binding small-scale technology percentage
• Previous small-scale technology percentages

About the small-scale technology percentage

The SRES creates a financial incentive for individuals and small businesses to install eligible small scale renewable energy systems such as solar panel systems, solar water heaters and air source heat pumps. It aims to balance supply and demand by requiring all STCs that are created to be surrendered over time. To do this each year the STP is set to require liable entities to surrender STCs equal to the amount estimated to be created in that year, plus or minus an adjustment for previous under or over surrenders.

The number of STCs each liable entity is required to source and surrender each year is calculated by multiplying the amount of wholesale electricity (relevant acquisitions) they acquire (minus exemptions) by the STP for that compliance year. Liable entities surrender STCs quarterly to the agency to meet their Renewable Energy Target obligations.

The Quarterly Carbon Market Report provides regular information on the markets the agency administers, including STC creation trends and whether a surplus or deficit is likely to emerge for the year.

Setting the small-scale technology percentage

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 matters the Assistant Minister must consider, as set out in the Renewable Energy (Electricity) Act 2000 (the Act). These matters are:

• estimated STC creations for the year
• estimated relevant acquisitions of electricity for the year
• the cumulative adjustment (the difference between previous STC creations and surrenders)
• estimated exemptions.

The Assistant Minister may also consider other matters when determining the STP.

The STP must be set by regulation by 31 March of the setting year, otherwise a default percentage is applied.

Estimated STC creations for the year

The STC creation estimate is the average of consultants’ forecasts (see the consultants’ modelling reports). For 2022, the estimated number of STC creations is 42.6 million.

Normally these estimates are made in January of the setting year and are based on data to 31 December of the preceding year. For 2022, due to the possibility of a delay to the regulations being made if an election is called, they are based on data to 16 November 2021 and the Clean Energy Regulator’s estimate of STC creations for the remainder of 2021.

Estimated relevant acquisitions of electricity for the year

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 megawatt hours (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 STP calculation, are 211,400,000 MWh.

Cumulative adjustment

The cumulative adjustment accounts for over or under supply of STCs in previous years. It equals the sum of all STCs created minus the sum of all STCs surrendered, since the SRES started. The cumulative adjustment is added to the STC creations estimate.

In recent years STC creations have significantly exceeded estimates, resulting in a significant positive cumulative adjustment. Under or over estimating relevant acquisitions and exemptions has a relatively minor impact on the cumulative adjustment.

Other considerations included in the cumulative adjustment are the:

• 659,564 STCs converted to Large Scale Certificates (LGCs) when the Renewable Energy Target was split into the Large-scale Renewable Energy Target and Small-scale Renewable Energy Scheme.
• 523, 885 STCs flagged in the REC registry as voluntarily surrendered, over this life of the SRES.

For the 2022 STP the cumulative adjustment is 5,099,563 STCs. This is a positive number, which means total STC creations exceed total surrendered STCs by this amount.

Estimated exemptions

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 unlikely to change.

Estimated EITE exemptions for 2020, used in the 2022 STP calculation, are 36,390,000 MWh.

Estimated EITE exemptions for 2020, used in 2022 STP calculation, are 36,390,000 MWh.

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. To date the default STP has not been applied.

Non-binding small-scale technology percentage

The Act requires the agency publish non-binding STPs for the 2 years following the setting year. The non-binding STP is intended to give an indication of what the STP could be in those years, however, the non-binding STP is not accurate in years when there is a large difference between STC creations and STC estimates. Non-binding estimates should be considered a general guide only.

The non-binding STPs do not bind the Clean Energy Regulator or affect the determination of a liable entity’s liability in those years.

The non-binding STP is calculated using the following formula. As with the STP, STC creations are the average of consultants’ forecasts (see modelling reports). For 2023, this is 39.1 million STCs and for 2024 it is 36.5 million STCs.

Previous small-scale technology percentages

Small-scale technology percentage