Meeting the RET

News that record investment in renewables means Australia’s 2020 Renewable Energy Target will be met has been welcomed by the sector. The Clean Energy Regulator previously stated that to meet the 2020 target of 33,000 gigawatt hours of additional renewable energy, approximately 6000 megawatts of large-scale generation capacity would need to be announced and built between 2016 and 2019. Happily, the major milestone will be reached ahead of schedule.

“While announcements started slowly in 2016, the momentum we saw in the later part of that year continued throughout 2017 and has now reached a level that we believe will be sufficient to meet the 2020 target,” Clean Energy Regulator Chair David Parker said.

Of the 6532 MW of new large-scale generation firmly announced since 2016, more than 4900 MW is fully financed, with most already under construction or operating, while the rest is expected to begin construction early this year.

A further 1600 MW of projects have a power purchase agreement in place which the CER anticipates will progress to financial close, with the bulk of new construction taking place in Queensland followed by Victoria and New South Wales.

“In 2017, more than 1000 megawatts of renewable projects were completed and began generation, the biggest year ever for new build coming online,” Parker said. “We expect 2018 and 2019 to be even bigger, with each year having more than double the new build completed compared to 2017.”

Solar energy comprises almost half – 46 per cent – of the total new project capacity announced since 2016.

“Solar is an important emerging player in the energy mix, particularly on long summer days. Over the next few years as more of these projects become operational they will make an increasing contribution to meeting peak electricity demand,” Parker explained.

“There is still a long way to go on the journey to reach the 2020 target, but we believe it will be met due to the hard work and tenacity of the electricity sector, the renewables industry and those that have financed these projects.”

In a written statement Energy Minister Josh Frydenberg acknowledged the support of the CEFC and ARENA in getting many projects off the ground.

“Importantly, ARENA helped with the early learning that drove down the deployment costs of solar allowing it to be more cost competitive with wind,” the Minister wrote.

One of the major shifts in the market is the huge increase in share of large-scale solar. In the first 6000 megawatts committed under the scheme, solar contributed only four per cent of the total. In the firmly announced projects since 2016, solar now makes up 46 per cent.

“This will ensure significant additional electricity supply is available in the market well ahead of 2020. Importantly, as outlined in the Australian Energy Market Commission’s 2017 Residential Electricity Price Trends Report released in December, this extra supply is expected to apply downward pressure on wholesale electricity prices over the next three years.”

The Minister says this year should see around 2600 megawatts of new renewables projects commence operating which will further strengthen reliability and reduce emissions in addition to reducing electricity prices.

This additional supply is expected to lead to a reduction in large-scale generation certificate spot prices (purchased by liable entities, mostly electricity retailers, to meet their renewable energy target obligations).

LGCs: In its large-scale generation certificate market update issued in late January the Clean Energy Regulator detailed expectations for about 33 million LGCs in the REC Registry prior to the 2017 surrender on 14 February 2018, with surrender obligations of approximately 25 million LGCs. Hence, following the 2017 surrender there is likely to be a surplus of about eight million LGCs in the market if liable entities fully surrender the estimated number of certificates.

If some liable entities pay the shortfall charge for 2017 (as occurred in 2016), an equivalent number of LGCs will remain in the market and will increase the level of surplus; with a potential transfer of demand into later years, when shortfall charges may be redeemed.

Liable entities can surrender certificates for more than 90 per cent of their obligations and carry forward the balance as shortfall without paying the shortfall charge. This may also increase the level of surplus and transfer demand to future years.

“Considering the above, it is our view that the LGC market will continue to remain in surplus through to 2020,” the CER wrote, noting too “There remains a significant difference between spot LGC prices and the prices of bundled power purchase agreements (PPAs).

For more information see Large-scale generation certificate market update.

Returning to small scale: To provide a clearer picture of small-scale installations in Australia, the CER is moving to quarterly publications of Cracking the small-scale code in 2018. The first publication for 2018 will be in April and contain data on January, February and March 2018 installations.

Due to the 12-month creation rule, which allows for small-scale technology certificates to be created within 12 months of a system installation, it can take several weeks or months for system owners to create their certificates. As the CER uses these creations as the basis for its installation data, the quarterly reporting period allows for additional data collection, and this will reflect more comprehensive installation figures.

The data will be published on the CER website and via email subscription service.

In addition, the Clean Energy Regulator’s postcode data for small-scale installations that provides more detailed information for small-scale installations across every postcode in Australia will continue to be updated monthly.