Australia: Renewable Energy Target Overhaul – Separating "Large" And "Small"

Last Updated: 24 May 2010
Article by Jennifer Mee and Nicola Sutherland

The Renewable Energy (Electricity) Amendment Bill 2010 (Bill) was introduced to the Commonwealth Parliament last week, with expectations to become law from 1 January 2011.

The Bill proposes to separate the Renewable Energy Target scheme into two parts, the Large-Scale Renewable Energy Target and the Small-Scale Renewable Energy Scheme. The changes aim to accelerate investment in large scale renewable energy projects, which stalled under the existing scheme.


The Bill:

  • creates separate obligations for liable entities in respect of "large-scale generation" and "small-scale technology"
  • creates "large-scale generation certificates" and "small-scale technology certificates"
  • retains the Renewable Energy Target concept, but only for large scale generation. For small-scale technology, liable entities must (together) surrender all small-scale technology certificates created in a year (i.e. without limit). A fixed price of A$40, plus GST will apply
  • separates the "Small-Scale Technology Percentage" from the Renewable Power Percentage, which will only apply to large-scale generation
  • facilitates the creation of an optional "clearing house" for small-scale technology certificates
  • sets a fixed price for small-scale technology certificates at A$40, plus GST
  • requires small-scale technology certificates to be surrendered quarterly (as compared to annually for large-scale generation)
  • introduces new civil penalty provisions including liability for executive officers
  • significantly affects the treatment of waste coal mine gas projects.

Two new types of Renewable Energy Certificates

The Bill proposes to separate renewable energy certificates into "large-scale generation certificates" and "small-scale technology certificates". The former will relate to electricity generated by accredited power stations and the latter to the installation of solar water heaters and small generation units.

Large and Small-Scale Registers

The current registration processes will continue to apply but there will be a "register of large-scale generation certificates" and a "register of small-scale technology certificates".

Clearing house (for small-scale technology certificates)

The rate of clearance of certificates for small-scale technology has been a problem and the Bill addresses this by empowering the Regulator to establish and operate a "clearing house" for small-scale technology certificates.

Use of the clearing house is optional and regulations will flesh out its operating rules. The Bill does provide that creators and owners of small-scale technology certificates may apply to enter a certificate into the "clearing house transfer list" as soon as a certificate is created. Certificates will be sold to liable entities on a first in first out basis.

Calculating required surrender amounts

The Bill retains the Renewable Energy Target (RET) and the Renewable Power Percentage, but restricts these to large-scale generation. As a result, the RET will be 4,000 GWh less each year than at present. The method for calculating a liable entity's required surrender amount for large-scale generation is also not materially changed.

In respect of small-scale technology, a liable entity will not know its actual liability for a year until the number of certificates created that year is known. To provide some certainty, the Bill requires the Regulator to provide each liable entity with a quarterly estimate of the amount of small-scale technology certificates that it will be required to surrender. This amount will be calculated by reference to the "small-scale technology percentage" and progressively adjusted up or down in each successive quarter. It will be firmed-up in the final quarter once the number of certificates created that year is known.

The small-scale technology percentage will be prescribed in regulations annually and in advance as an estimated amount which may also be trued-up in subsequent years, once actual figures are available.

Surrender process

Large-scale generation certificates will be surrendered annually through the energy acquisition statement process (as currently occurs). In contrast, small-scale technology certificates are to be surrendered quarterly (although the fourth quarter surrender occurs in line with the annual energy acquisition statement process).

A liable entity's shortfall position for both large and small-scale obligations will be calculated on the basis of its annual energy acquisition statement (as opposed to quarterly). The method of calculating shortfall charges has not materially changed, but the terminology for shortfalls and charges has been separated into "large-scale" and "small-scale", consistent with other concepts.

New civil penalty regime

The Bill introduces new civil penalty provisions for improper creation of certificates and for providing false or misleading information to a person who relies on it to create certificates. The Bill also includes executive officer liability for civil penalties by corporations.

Civil penalties may be enforced by the Regulator and require a lower civil standard of proof. Contravention of a civil penalty provision can result in suspension of registration and significant fines – particularly if an offence concerns more than 100 certificates. The new framework is consistent with the civil penalty frameworks in the National Greenhouse and Energy Reporting Act 2007 (Cth).

Transitional provisions – treatment of existing and future Renewable Energy Certificates

All renewable energy certificates created before 1 January 2011 will be treated as large-scale generation certificates. Certificates from small generation units and solar water heaters installed before 1 January 2011 will also be taken to be large-scale generation certificates.

For contracts entered into before the Act commences, references to "renewable energy certificates" or "certificates" will be interpreted to mean large-scale generation certificates (subject to the contract expressing the contrary).

For existing contracts for the future transfer of certificates created from small-scale technology, parties may apply to have these deemed to be large-scale generation certificates with the Regulator's approval.

Partial exemption for emissions intensive trade exposed entities

The Bill preserves the rate of assistance for emissions intensive trade exposed entities (EITEs) under the present RET. Under this system, a liable entity may apply for a partial exemption certificate. This provides it with a partial exemption amount for a year at rates set out in the regulations. The Bill clarifies that a liable entity's partial exemption amount will be taken into account in calculating both its large-scale and small-scale liabilities.

Transitional treatment of waste coal mine gas

The Bill proposes changes which will affect existing, as well as future, waste coal mine gas (WCMG) projects. Significantly, it proposes to repeal 1 July 2011 as the date from which existing WCMG power stations (once accredited) may commence creating renewable energy certificates. It defers both this date and dates for accreditation of existing WCMG power stations, which become matters left for future regulations.


The Government intends to commission an independent review of the RET scheme in 2012, to consider mechanisms for setting the fixed price for small-scale technology certificates. The review will also consider whether certificate prices should be set by an independent regulator, options in achieving national consistency in assistance measures, changing technology costs and impacts on electricity prices.

Next steps

The Bill has been sent to the Environment, Communications and the Arts Legislation Committee, which will report back by 10 June 2010. The Coalition has not yet given the Bill its support.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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