Australia’s Renewable Energy Target (RET) and the incentives created by it appear to no longer serve as the main driver of renewables growth in the country, the Clean Energy Regulator (CER) says in its overview of 2018.
Firm renewable energy project announcements kept coming in 2018 and early 2019 even as it has been clear for quite some time that the large-scale RET for 2020 would be exceeded.
“It is likely that during 2018 the key driver of new announcements shifted from Renewable Energy Target incentive to commercial factors and state procurement processes,” CER said is its annual RET statement, tabled in Parliament today. The number of power purchase agreements (PPAs) struck by both retailers and corporates for commercial reasons is growing as wind and solar energy costs keep dropping. The finance models in the sector are diversifying.
THE RET
In 2017, the CER calculated that Australia needed to commission 6,400 MW of green power capacity between 2017 and 2019 to meet the 2020 target. Now it is sure that by the middle of 2019 that capacity will be accredited and generating power ahead of schedule.
Total of 11,611 MW of renewable energy projects have been announced in the country since the start of 2016. Of these, 4,474 MW are already operational and 5,408 MW are under construction. PPAs have been signed for a further 1,729 MW and the CER says these could reach financial close and enter construction in 2019.
In 2018, 3,455 MW of renewables capacity secured accreditation under the RET, a record for the scheme surpassing by far the 2017 volume of 1,113 MW. The CER expects roughly 4,000 MW large-scale capacity to be accredited in 2019.
“The current pipeline of projects that the Clean Energy Regulator is tracking suggests that we could see similar levels of capacity commissioned in 2020 and 2021 as we expect in 2019, though with less certainty,” the regulator said.
Power generation by renewable energy plants is seen to rise from some 22 TWh in 2018 to about 30 TWh in 2019 and 40 TWh in 2020. RET said quarterly electricity emissions have decreased to 44.1 tonnes of carbon dioxide equivalent (CO2-e) at the end of September 2018, from 53.2 tonnes CO2-e in September 2008.
THE PRICE OF CERTIFICATES
When a power plant gets RET accreditation, it starts receiving large-scale generation certificates (LGCs) for the electricity it produces. "Liable entities" have to buy these certificates, bringing revenues for renewable energy generators. Things do not look at all bright for the LGC market currently. The spot price per certificate fell from roughly AUD 85 (USD 60.5/EUR 54) in January 2018 to AUD 47.50 in December 2018, and then to AUD 31 by the middle of March 2019.
The drop in the price can be attributed, according to the regulator, to two factors -- the market recognising the 2020 RET will be materially exceeded, and CER’s updated stance on deferral of certificate liability.
As a rule, the liable entities can carry forward a shortfall of less than 10% of their liability to the following assessment year without facing a shortfall charge. If the shortfall is more than 10%, a charge of AUD 65 per LGC not surrendered is paid, but the funds can be redeemed in the next three years when enough LGCs are surrendered to acquit the shortfall.
In October 2018, CER said it had no objections to the use of shortfall, provided liable entities surrendered sufficient certificates in a subsequent year. This has caused a shift of certificate demand to future years, affecting prices on the LGC market.
“Considering lower forward contract prices, and the large increase in supply expected in 2019, the Clean Energy Regulator expects further declines in the spot certificate price in 2019.”
The Large-scale RET made up an estimated 2.9% of the average household electricity bill in 2018, according to the Australian Energy Market Commission (AEMO). The CER said the falling price of LGCs will moderate the costs to electricity retailers and that this should be reflected in the pass-through cost to electricity bills in 2019.
(AUD 1 = USD 0.71/EUR 0.63)
Choose your newsletter by Renewables Now. Join for free!
The Collgar wind farm. Source: www.collgarwindfarm.com.au
