26 October 2012
Renewable scheme charges set to increase
The Clean Energy Regulator (CER) is required to publish a non-binding estimate of the Small Scale Renewable Energy target (SRET), two years ahead. It has recently published a revised target for the 2013 and 2014 years.
The projected target for 2013 represents a significant increase over the early estimate, up from 7.94% to 18.76%. The 2014 forecast is up from 6.10% to 7.69%.
In considering the effect on electricity consumers, Energetics has assessed that the increase will be in the order of 0.4 c/kWh above what had been estimated for 2013.i
The Federal Government’s Small scale Renewable Energy Scheme (SRES) came into being in 2011 when the MRET (Mandatory Renewable Energy Target) was split into two: the SRES and the Large scale Renewable Energy Target (LRET). To encourage investment in the two forms of renewable energy projects, tradeable certificates are created according to the amount of electricity generated through eligible renewable energy sources. Liable entities which are typically electricity retailers are required to buy and surrender a set number of certificates over the course of each calendar year. The costs to electricity retailers of participating in the SRES and LRET are passed onto consumers. The price of a Renewable Energy Certificate is determined either in the open market for Large-scale Generation Certificates (LGCs) or Small-scale Technology Certificates (STCs), or through an STC Clearing House operated by the Clean Energy Regulator which fixes the price at $40 per certificate (plus GST).
What is driving the revised, upward estimate?
The CER has relied upon an external consultant to determine the projections. Significantly impacting the 2013 forecast is the oversupply of Small Scale Technology certificates (STCs) carried forward. The design of the scheme, being of an uncapped nature, requires that all STCs created must be acquired by liable parties (retailers). Nearly half of the 35 million certificate requirement for 2013, relates to a carry forward from 2012. This means that earlier influences on STC creations linger for some time. For example, the solar credits multiplier reduced from 3 to 2 in July 2012, but this ‘driver’ remains by virtue of the overhang.
The consultant’s report identified a number of underlying factors producing the growth, since the previous estimate was provided in December 2011. These are as follows:
Reduction of the Solar Credits multiplier, “The declining numbers for the PV component (from 2013 to 2014) reflect the reduction in the Solar Credits multiplier from 2 to 1 from 1 July 2013. ii
Removal of a number of federal Renewable Energy Bonus Schemes, such as the earlier closure the federal government’s rebate of $1,000 for eligible solar hot water systems.
Reductions in a number of state feed-in tariffs (FiT) for eligible solar photovoltaic (PV) systems - in Victoria and Queensland. For example, the Victorian Scheme has gone from 60c/kWh, to 25c/kWh and from 1 January 2013 will be 8c/kWh.
The introduction of a carbon price.
Exacerbating these changes is a further phenomenon. As the report states “For example, the updated projections of STCs created from PV in 2012 are higher than that from 2011 (36.7 million compared to 18.5 million). The majority of this difference was driven by rushed buying, which was induced by the introduction of the carbon price as well as the reduction in the Solar Credits multiplier." iii Simply, prospective PV purchasers were keen not to miss out.
Energetics can work with you to ensure the pass through charge has been calculated fairly under your electricity contract.
i Based on the difference between the March 2012 and October 2012 STP estimates for 2013, Small-scale Technology Certificate (STC) rates and line loss adjustment.
ii. SKM MMA, Update to Small-scale Technology Certificates Data Modelling for 2012 - 2014,FINAL REPORT,18 Oct 2012, Page 2.
iii Ibid, Page 20.